“Like so many things in life, it’s all about the timing,” said Walston. “While the recent EMV upgrades forced credit unions to spend money upgrading their ATMs, the last big event at the ATM was in 2012, when so many credit unions bought new machines in order to be compliant with the Americans with Disabilities Act (ADA). That was a major event in which a large turnover of old ATMs was a boon for ATM manufacturers. Fast forward almost seven years, and many of those once shiny new ATMs are now in their final lifecycle stage.”
The Cost of Upgrades
For the machines that can be upgraded, the cost of outfitting them with the new Windows 10 operating system will run anywhere from $6,000 to $12,000 per ATM, said Walston.
“But many of those older machines simply can’t be upgraded, and that’s going to mean buying new ones that can range from three to five times the price to upgrade, depending on ATM type and functionality,” he explained.
A credit union needs to make those decisions now, Walston emphasized, in order for a credit union to be sure that their upgrade—or their new machine—is in place in time for Jan. 14, 2020.
“That is the official date when Microsoft stops supporting the current Windows 7 operating system and ATMs need to be running on the Windows 10 system,” he said. “There is no real advantage to be gained by delaying a year before making the budget decisions, so the pressure is on.”
A Common Scenario
Walston said Dolphin Debit is seeing a common scenario in its discussions.
“A credit union has five or six ATMs, all right about six to eight years old. There is still some book value left in those machines, as they are being depreciated at seven or 10 years. The credit union’s challenge is to balance the few thousand dollars of book value left in those aging machines against the price of the $6,000 to $12,000 upgrade expense. Does the credit union want to have that much invested—and on the books—in a seven-year-old ATM that is likely on the downhill side of its useful life?”
Walston said that’s when buying new machines starts to look like a better—though far more expensive—option.
“But then the likely $200,000-plus capital expense for that fleet of five or six ATMs is a significant hurdle in light of the credit union’s many other 2019 budget priorities,” he said.
Walston suggested an alternative that credit unions are turning to in growing numbers.
“That alternative is outsourcing, turning ownership and operation of the ATM fleet over to a management company,” said Walston, whose company provides such a service. “In the short run, this strategy eliminates the need for a capital budget allocation for 2019. As the management company takes over the machines, it also takes on all the burdens of making sure machines are upgraded in time for 2020 or—if they’re too old or otherwise not upgradable—providing a new one.”
In the long run, outsourcing transfers all the compliance and management responsibilities to the service provider. All the maintenance, repair, network issues, and concerns over future machine upgrades or new ATM regulations are no longer the credit union’s worry, Walston said.
“Every year, more and more credit unions are making the choice to outsource some or all of their ATMs,” he said. “They find that being free of all the management hassles connected with ATMs is liberating, and allows them to dedicate more resources to other forms of member service. Credit union executives are realizing they don’t want to be in the ATM business when they can outsource to the experts and focus on the credit union’s core competencies.”
Walston added one other benefit of outsourcing.
“And when it comes around to each budget season, the subject of ATMs never needs to come up for them, regardless of any new laws, regulations, compliance issues, or technology advances,” he said.
SVP, Director of Sales