Independent ATM operators will soon have to upgrade, replace or abandon their newly obsolete machines.
The nation's fleet of cash machines is becoming outmoded because of the upcoming shift to EMV-chip cards, the decision to abandon a key Windows operating system, and issues raised by the Americans with Disabilities Act and the Payment Card Industry data security standards.
But that "perfect storm" of adversity's nothing new for America's independent ATM deployers.
"The independent operators should get medals for making a living in this business after all this time," says Rob Evans, director of industry marketing for ATM manufacturer Nautilus Hyosung America.
For years, the independent ATM market alternated between the status quo and crises, he notes.
"If we go back to the last decade, we had Y2K, and then back to stasis. We had triple DES [security] migration. Stasis. Then it was ADA upgrades. Stasis," Evans says. "Now we're looking at EMV and the double whammy of being able to support chip cards along with, oh, by the way, if you are on a Windows XP platform, you might want to get off of that because Microsoft is discontinuing the operating system."
But many industry leaders maintain that change could bring opportunities for ATM deployers who are positioned to respond strategically. Survival in the coming years will largely depend on finding competitive advantages and creating revenue opportunities.
When upgrading, deployers should consider what's required, what's a good idea and what can wait.
And remember that April will mark the end of an era for Windows XP, the operating system at the heart of many of America's ATMs. After that date, Microsoft will issue no new security patches.
Any ATMs remaining on an XP platform will become juicy targets for hackers, says David Tente, executive director of the U.S. Chapter of the ATM Industry Association.
"My guess is that a lot of ISOs won't have the transition done on all their machines before support is terminated," Tente says.
The cost and difficulty of upgrading a machine to a newer operating system varies widely depending on what's "under the hood." Newer machines with more memory and better processors may simply need a software update. Older machines may require significant hardware upgrades.
"The worst case you would run into is the processor may not be able to handle the new OS," Evans says. "And in some cases, the price of the upgrade may rival the cost of the machine."
Assuming all continues according to published schedules, independent ATM operators should be well-engaged in their plans to upgrade their machines to support the chip-based EMV card protocol.
That's because published schedules show that in 2015, ATMs should be capable of accepting EMV cards, and in less than three years, acquirers will assume the liability if fraudulent magnetic stripe cards are used in a transaction when a chip-enabled card was available.
ATMs would need new chip-enabled readers, new security modules that support EMV requirements and software updates to help process the transactions. Each of those upgrades comes with a cost but does not bring in additional revenue, Tente says.
"For independent operators, the business case for an upgrade is pretty sketchy. It is a big burden, cost-wise," he says. "There is not an opportunity to make money on this."
Still, upgrading to the new standard is not only required by the new guidelines, it's going to become expensive if ATM operators hold out too long, says Dean Stewart, senior director for core product management at North Canton, Ohio-based ATM manufacturer Diebold.
While fraud liability will sting if a criminal rips off a machine that didn't comply, the real motivation to switch will come when processors begin to decline transactions.
"At some point, a lot of the networks will stop accepting mag stripe when chip is available. That means a loss of transactions, and for an ATM operator, that is loss of revenue," Stewart says. "Fraud happens, but loss of revenue is real."