The Americans with Disabilities Act (ADA), signed into law by President Bush in 1990 and subsequently amended with future effective dates, requires banks and credit unions to ensure that their ATMs are in compliance with provisions of the Act and its amendments.

by Neil Hartman, Sr. Manager, Banking Practice

The Americans with Disabilities Act (ADA), signed into law by President Bush in 1990 and subsequently amended with future effective dates, requires banks and credit unions to ensure that their ATMs are in compliance with provisions of the Act and its amendments.

Specifically, the 1991 standards mandate that instructions and all information for use be made “accessible to and independently usable by persons with vision impairments.” Further standards issued in 2010 require capabilities for voice guidance, height and reach, input device, numeric keypads, function keys, display screen, accessibility, and Braille instructions. Moreover, ATMs must be speech enabled in order to meet the independent usage standards.

Banks and credit unions were required to have compliance plans in place by March 15, 2011, and the compliance deadline for upgrades is March 15, 2012. It appears much of this work is still in progress. Phoenix Marketing International estimates that of the more than 440,000 ATMs operating in the United States, approximately 160,000 were in full compliance with the new ADA standards at the end of 2010, leaving the remaining 280,000 in need of upgrades or replacement.

At the same time, West Monroe Partners estimates that one of every eight ATMs currently is not profitable based on surcharge and cost savings estimates versus operating costs. This means that banks face a real risk of investing to upgrade or replace machines that are unprofitable and otherwise may not support their business strategies.

Given the high cost of compliance—estimated by West Monroe to be $7,000 to $10,000 for machines that require software upgrades and $20,000 to $30,000 for machines that require hardware replacement —plus substantial potential penalties for non-compliance, banks should take advantage of this process as an opportunity to re-evaluate their overall ATM strategy and ensure that they are investing compliance dollars in a way that will maximize ATM and bank profitability.

Evaluate before acting
If your institution is currently working toward ADA compliance, or trying to optimize the profitability of your ATM network, here are 10 steps you should be taking to assess and strengthen your ATM strategy around customer experience, operational efficiency, and cost of ownership.

  1. Create a detailed inventory of existing ATMs, including transaction volume, surcharge activity, location demographics, proximity to a branch, and machine functionality. Then determine whether each of these ATMs meets 1991 ADA standards and/or 2010 ADA standards and identify any performance gaps. Whether the ATM can be upgraded and the cost of doing so will depend on the model and age of the ATM. 
  2. Calculate the total cost of ownership by creating a detailed baseline of existing ATM operational costs and service levels over a 3-5 year period.  The analysis should include any compliance costs and one-time upgrades needed in order to become ADA compliant.
  3. Additionally, calculate all current surcharge revenue, cross sales opportunities and cost avoidance benefits of your ATM fleet; for example, re-routing branch traffic or distributing marketing messages at the machines rather than through more expensive direct channels.
  4. Identify any functional GAPs and opportunities between your current state ATMs, features that are currently available in the market, and what your competitors are currently offering.
  5. Update your competitive positioning strategy through analysis of transaction volumes, surcharges, cannibalization, and placement options. This information may provide insight that can help expand your footprint, retire inefficient or unprofitable machines, and/or relocate existing ATMs to higher volume locations.
  6. Make sure your ATM strategy is aligned with the institution’s customer experience strategy; that is, ensure it provides appropriate levels of convenience and personalization.
  7. Similarly, ensure linkage with the key elements of the institution’s marketing strategy, including brand reinforcement, cross-selling strategy, customer data, and advertising.
  8. Develop a governance structure that defines how ATM network management fits into the retail organization and multi-channel strategy.
  9. Determine if it makes more sense to manage ATMs in-house or outsource them.
  10. Review all vendors with whom you have ATM service relationships to seek out synergies, efficiencies, and potential savings. This includes reviewing contracts and requesting discounts for bundling. Keep in mind that adding newer machines should reduce maintenance costs.

Set the direction
These steps help you not only address compliance requirements, but to do so in a way that is strategically focused and aligned with the institution’s business objectives. They guide development of an appropriate ATM operating model and strategy—for example:

  • Do you view ATMs as a profit center that emphasizes revenue generation through advertising or third-party sales?
  • Are your ATMs an integral element of your multichannel strategy that emphasizes customer experience and branch cost reduction—which, in turn, drives key decisions such as maintaining low-cost versus value-added ATMs and owning versus outsourcing your ATM fleet?

While these are only two illustrative examples, it goes to show how important setting a direction is to helping accurately assess and manage the cost of compliance.   While ADA compliance is a necessary and costly step, it can also be a catalyst for a more effective, profitable ATM strategy going forward—an opportunity that most institutions would be well served to embrace.