Envelope-Free ATMs Boost Deposits

CUNA’s E-Scan Newsletter
June 4, 2010 | COMMENTS

As two of the nation's largest banks take the lead in rolling out envelope-free ATMs, users' comments remain mixed. Many consumers appreciate the convenience, while others complain that the machines are too slow or reject their deposits.

Fewer small or mid-sized institutions are following the banks' lead. Many of the wait-and-see institutions have been stymied by the cost issue, reports the Bank Administration Institute's Banking Strategies magazine. Envelope-free ATMs can cost an estimated $30,000 to $50,000 per machine—roughly 50% more than a traditional envelope-taking ATM.

Is the investment worth it for a channel that customers typically use more for withdrawals than deposits?

Envelope-free ATMs provide a differentiation advantage, says Wes Wilhelm, senior research analyst for Aite Group. “The underlying factor is making the interaction as convenient and seamless as possible,” he says.

Aite research indicates most envelope-free deployment is focused among the country's largest banks. By the end of 2009, bank respondents among the nation's 10 largest banks were 30% more likely to have deployed automated deposit-taking capabilities than other banks in the top 50, according to Aite.

Bank of America and Wells Fargo both have moved toward envelope-free networks recently. At the end of 2009, Bank of America's 13,800 full-function ATMs were capable of taking envelope-free deposits. The bank also operates 5,000 cash-dispensing-only machines. Since 2003, Wells Fargo has swapped out nearly one-third of its 12,300 ATMs.

Bank executives report an increase in customer satisfaction as more people use this self-service channel for their deposits. But the technology is not without its detractors. There are plenty of online blogs describing customers' “nightmare” scenarios, with complaints about frequently rejected deposits or ATMs that are too slow at printing receipts.

The pioneering ATM banks respond that they are working out these glitches through a combination of technical tweaking and customer education. Further, they claim the cost-cutting benefits from lowering the cost of deposits and service and reducing fraud are too appealing for them to ignore.

Proponents say consumers are more satisfied than with traditional envelope-based deposit because they don't have to fill out deposit slips or tally amounts. Since institutions receive the image immediately, the deadline for same-day credit of an ATM deposit has been extended as late as 8 p.m. In addition, customers get an image of their actual items at the point of deposit for proof they made a valid transaction.

And consumer use patterns may be changing. In contrast to an Aite Group study last year, which found that deposits typically comprised only one out of 10 ATM transactions, bank officials now claim:

• Deposits at Bank of America's envelope-free ATMs have increased between 20% and 25% annually. Currently, more than 20% of ATM transactions are deposits.
• In California, where Wells Fargo has fully penetrated its home market with automated deposit, over 40% of deposits are made at ATMs.

Despite presumably tens of millions of dollars in investment, this technology likely brings substantial benefits to banks. A teller deposit costs $1.34 on average, compared to only 59 cents at an envelope-free ATM, according to TowerGroup research.

In addition, institutions save money by making fewer courier runs to pick up deposited items from ATMs and replenish envelope supplies. Depending on the volume of deposits, pickups may drop from daily runs to about twice a week at envelope-free machines.