Why credit unions are opting for ATM outsourcing

ATM equipment can be expensive. The typical capital investment for ATM hardware ranges from $6,000 to $40,000 – depending on the size and operations capability of the machine. In addition to initial expense, financial institutions must perform ongoing operations and management to connect, maintain and service each ATM.

In some cases, regular operation requires contracts with third-party vendors. The institution will also likely incur personnel expenses to arrange and monitor each of the ATM functions. Finally, banks and credit unions must maintain ATM compliance for each machine – including hardware and software upgrades to meet security compliance, ADA (Americans with Disabilities Act) compliance and EMV chip-card compatibility.

Today, ATMs are rarely a profit center for financial institutions. Instead, these machines are a depreciating asset requiring a continuing expenditure of time and management dollars. The costs and requirements have begun to drive many banks and credit unions out of the ATM business – often in favor of full outsourcing to third-party ATM operators. 

Own the Benefits, Not the Hardware

Selecting an ATM outsourcing program from a third-party vendor provides institutions with a variety of benefits – and uniquely fits a “benefits, not hardware” outlook. Though some institutions select to retain machine ownership and only hand over operations to a third-party, many choosing outsourcing options hand over full ownership of their machines along with the operational functions.

Outsourcing ATM operations results in immediate benefits – freeing up employee time.

However, third-party ATM management provides other perks, as well. Businesses specializing in ATMs are more focused on ATMs with a greater number of staff available to monitor, manage and assess the ATM fleet. As a result, they are usually capable of providing a higher level of ATM service.

ATM outsourcing also lowers the cost to financial institutions as outsourcing vendors leverage their larger ATM fleet to lower overall expenditures for goods and services – passing those savings onto their clients.

Credit unions selecting to eliminate ATM ownership gain even more benefits as they are no longer responsible for handling upgrades or replacements to their ATM fleet. While most financial institutions are very familiar with the high cost of these upgrades due to the recent sunset of Windows XP and the introduction of new EMV standards at the ATM, they are not looking into the future, when support for the current operating systems end in 2020. This single benefit reduces significant overhead costs that financial institutions will run into again.

Outsourcing in Action

Citizens Bank, based in Kilgore, TX, and Community National Bank (CNB), of Hondo, TX, are two community-based financial institutions that have selected outsourcing over in-house ATM operations.

Citizen’s Bank needed to reduce capital expenditures and free up employee time to focus on newer products and services. Choosing to outsource their ATM fleet allowed the bank to reclaim some of the capital expenditure as well as the time and effort they had tied up in maintaining their ATM network.

CNB cites compliance as the final straw in their decision to outsource their ATM management. “We didn’t want to sink any more capital into ATM upgrades or buying new machines,” said CNB President and CEO, Ronnie A. Miller. “We needed a solution that would allow us to reduce our costs, eliminate costly service agreements and relieve the compliance burden without compromising the service our customers have come to expect from us.”

Both CNB and Citizen’s Bank have seen a consistency in excellent service, a cut in compliance and regulatory headaches and a significant cost savings. Handing over ATM management has allowed them to focus their attention on more significant items – such as opening commercial accounts, generating more loans, mobile banking, remote deposit capture and Apple Pay.

“I don’t know why any bank would want to own or operate ATMs anymore,” said Citizens Bank Executive Vice President Melvin Jordan.