Deposit automation, or envelope-free deposit technology, has helped the leading ATM makers drive sales the past five years, primarily among the largest U.S. banks. Now smaller banks are buying the technology to help them catch up to their larger rivals.

Diebold Inc. says its shipments of deposit-automation tech rose by more than 150% to national accounts — excluding heavyweights such as Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. — and by nearly 50% to regional banks.

"This represents a good, sustainable trend," said Thomas Swidarski, president and CEO of Diebold, in a conference call to discuss earnings this week.

Foreign banks also are starting to look at the more-advanced ATMs, Swidarski said.

Indeed, banks are starting to open their pocketbooks in search of newer ATM technology.

Rival NCR Corp. similarly lauded deposit automation as a chief revenue-driver, with Bill Nuti, company chairman, president and CEO calling the market "alive and well" during an earnings call last week.

SunTrust Banks chose NCR as the sole provider of its deposit-automation network, having installed 1,200 NCR SelfServ ATMs throughout its network in the Atlanta region.

Gil Luria, an analyst with Los Angeles-based Wedbush Securities, said in an interview this week that Wells, Chase and B of A helped drive the market's growth over the past five years, and it will take another three to five years for other deployers to update their ATM fleets.

Smaller deployers held back on the investment, in part because of cost pressures caused by the recession. But they also wanted to make sure the technology worked, Luria said.

"The big banks said it not only saved them money, but it helped to engage customers and get them to deposit more at the ATM," he says.

Wincor Nixdorf, an early leader in the automated deposit ATM market, may not be able to take advantage of the growing demand among smaller banks to the extent NCR and Diebold can, Luria says.

Paderborn, Germany-based Wincor has had a hard time expanding its service beyond Wells and Chase, Luria says.

"It's harder to win smaller banks because they don't have the service footprint to do so," he says. "There's quite a bit of investment needed, and I'm not sure they will do that."

Wincor Nixdorf did not immediately return a PaymentsSource call seeking an interview.

Luria sees a similar trend forming with mobile remote-deposit capture. Certain large banks, led by Chase and USAA Federal Savings Bank, launched the technology early while other players waited to see whether it worked.

"ATMs and mobile deposits are ways to keep people out of the branch," he says. "A bank would rather you use an ATM than go into a branch."

Banks for a time tried to encourage consumers to come inside branches as a means to cross-sell other services, Luria noted. What they learned was that customers who came in to make a deposit did so wanting only to do that. Individuals looking to take out loans, however, represented a better opportunity to cross-sell a credit card, for example.

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