Amid mergers and consolidations, industry upheavals, technical change, competitive pressures, and compliance deadlines, how does a credit union decide whether to take on the task of in-house ATM operations or to outsource this critical member service function? The question is a complex one, but once we cast aside the jargon and hype, the answers are surprisingly simple. Consider the following scenarios and see if you recognize your credit union. More Features, Less Cost A $100 million credit union has a network of 10 ATMs. The credit union says their in-house ATM solution permits them to customize services and promotional offers to members, offer integrated check imaging functions, manage cash and deposits more effectively, and deploy new terminals at low cost. The solution has paid for itself over time by saving the credit union money each month on network charges. Peace of Mind A $1 billion credit union with a widespread network of 80 ATMs outsources the responsibility for operating and monitoring the terminals to their ATM switch processor. The CFO considers the monthly charges from their processor a small price to pay for peace of mind. Best of Both Worlds A $500 million credit union operates a network of 20 ATMs using an in-house platform that integrates with its core data processing system. They also partner with a third party provider to deploy 15 additional low cost ATMs in outlying locations based upon a cost model tied to transaction volume. The VP of IT believes that he has accomplished the best of in-house processing and outsourced solutions with his hybrid network. Is outsourcing of ATM operations an idea whose time has once again arrived? Or does the new generation of in-house ATM processing platforms offer more powerful features and control, with the advantage of saving the cost of outsourcing? Are your ATMs “in” or “out,” and which is the right choice for your credit union? Answer the questions below to determine if “in” or “out” is the best fit for your credit union. Bottom Line Driven Does your credit union maintain a profitability-based view of ATMs and other electronic operations? If so, a basic return on investment (ROI) analysis can be performed. Typically, in-house ATM operations become profitable once a credit union has a network of 8 to 10 terminals. The exact break-even point depends upon volume and other factors. Question – How many terminals does the credit union currently own? Score 1 point for each set of 10 ATMs. Where an outsourced solution is often selected to simplify operations, an in-house solution typically provides the greatest opportunities for integration into the credit union’s network and core data processing environment. Credit union representatives have access to greater detail regarding activity at credit union ATMs. With an outsourced model, transactions at the credit union’s ATMs typically come in the same channel as all network ATMs. Very limited information in regards to foreign activity may be available and manual entries may be required to general ledger accounts. Question – How would you rate your credit union’s need for operational efficiency? 1)Comfortable with manual processes and limited information 2) Prefer automation and greater access to information 3) Seek to automate most manual processes and need access to all transaction detail Score the number of points that corresponds with your response # Member Service Focus While maintaining an eye towards costs, many credit unions make their operations decisions from a member service perspective. In-house operations offer credit union staff greater access to information related to ATM activity, and they can provide direct responses to member inquiries. In an in-house environment, daily limits, promotional messages, deposit holds, fees and other member controls can more easily be tailored to the individual. Credit unions driven to provide a premium level of service are more inclined towards in-house ATM operations, where those that maintain a fairly standard offering in the ATM area are more likely to select the outsourced model. Question – How would your rate your credit union’s member service focus? 1) We provide members with good ATM service in a fairly homogenous environment 2) We provide a higher level of service, particularly to our premier members 3)We are driven to be an industry leader in service and customization Score the number of points that corresponds with your response # Control Credit unions with in-house expertise required to administer servers and communication links see greater benefit in the in-house environment. The ability to easily add new ATMs, manage screens and monitor uptime and performance are each important aspects of an in-house environment. Credit unions with limited staffing who do not have technical personnel to administer systems may prefer to leave the control in the hands of outside experts. Question – How would you rate your credit union’s staff in the ATM area? 1) Staff are most comfortable in a “turn-key” or service bureau environment 2) Have very limited number of staff qualified to implement or operate systems 3) Have sufficient staff qualified to implement and operate systems Score the number of points that corresponds with your response # Sizing Your Score If you scored 10 or higher, you are probably already operating your ATMs in an in-house environment. If not, you should strongly consider an in-house solution. If you scored 6 – 9, you are a good candidate for in-house operations and should determine which of the factors (member service, operational efficiency, bottom line profitability, or control) are most critical in your decision. If you scored 5 or less, you are probably operating in an outsourced environment and have no pressing need to change to in-house ATM operations. Provider as a Partner Just as important as the decision between in-house and outsourced is the selection of the right partner. Even credit unions that are well suited for an in-house operation have had unsuccessful experiences with an underpowered or poorly integrated in-house solution. A credit union that selects a seemingly robust product may get an unwelcome surprise when the in-house provider outsources the implementation to a contract provider. The key factors in selecting a partner for either in-house or out-sourced ATM operations are as follows: 1) The ATM solution must provide a high degree of integration with your data processing and network environment. The partner must take full responsibility for delivering this level of integration. 2) The partner must truly understand your business environment and be willing to tailor the solution to suit you. 3) The partner must be able to serve as an extension of your own staff and expertise. The partner must listen as well as lead. 4) The partner is equipped to handle the complete life cycle of your ATM solution from sales to implementation to support to enhancement and future planning. Have it Your Way Many credit unions that monitor the effectiveness of their ATM program have discovered that it is possible to be both “in” and “out.” Credit unions may find benefits in directly operating their full function ATMs at or near branch locations while partnering with an outside provider to operate cash dispensing machines at retail locations. This hybrid approach permits the credit union to deploy ATMs broadly and to strategically balance between member service, control and cost on a per location basis. When it comes to decisions on managing your ATM operation, be wary of fads or copying the credit union across town. The best solution for your credit union depends not upon the latest industry buzz, but rather on your credit’s operational profile and service strategy. Whether you strive to differentiate yourself from other financial institutions through your ATMs or seek to simplify your operations, the question of “in” or “out” is one of doing what is right for your credit union.