ATM software developers at Korala Associates Limited, or KAL, figured they had a pretty solid pitch to banks: a machine they claim costs one-tenth of a traditional ATM, yet provides all of the banking services a customer would need while in a retail setting.

KAL introduced what it calls a “retail teller machine,” a cashless ATM designed for use in retail settings, to the U.S. banking industry in October, with plans for a global rollout in early 2013. The U.K.-based company is targeting banks and independent deployers, according to Steve Hensley, executive vice president of global sales for KAL.

But pilot testing of the RTM in various locations around the world where ATMs are lacking took an interesting twist when larger banks began asking the software company about placing machines in bank branches, Hensley says.

Because ATMs aren’t designed for customers to conduct longer transactions or inquire about various services, some banks viewed the RTM as a viable option to complement their existing ATMs

“You can’t offer things on an ATM that take more than a few minutes,” Hensley says. “These banks believe that the RTM doesn’t have those limitations and could be used for various services, such as video conferencing and as a vehicle to help the bank sell products.”

It was a pleasant surprise for KAL executives when they heard bank officials say they thought the RTM could create an “Apple store experience” in the bank branches by providing self-service efficiency, Hensley says.

Even with the bank-branch market surfacing since the RTM was first introduced, KAL will continue to focus on the retail setting it first envisioned as the perfect place for its teller units.

There, consumers would use their ATM cards and PIN to request cash from the RTM. The machine prints a unique payment voucher that can be redeemed for cash or used to buy products at the retail point of sale. The retailer is immediately compensated by the RTM software, by executing a “back-to-back” transaction that remits the dispensed amount into the retailer’s connected bank account, which matches up when the retailer submits the receipt. If a customer uses $80 worth of a $100 voucher on products, he would receive $20 in cash back from the merchant, Hensley says.

“It’s similar to a debit card cash-back transaction, but it takes place before the customer goes shopping, rather than the customer being asked at the POS if he wants cash back from the debit card transaction,” he adds.

KAL continues tests for allowing customers to make deposits, inquire about account balances, make bill payments and account transfers on the units. The data security-compliant units also support EMV chip-and-PIN transactions.

If a customer needs to speak to a teller, the RTM provides an option for video conferencing with a bank representative. Because the units do not hold cash, they do not demand the security services necessary with ATMs. However, the option to make deposits on the units may be determined by retailers, who would be required to be at the RTM to confirm the deposit amount, assure the bank received the transaction and take the cash out of the unit, Hensley says.

Normally just a software provider, KAL for the first time manufactured the hardware and shell for the RTM. KAL sells the units to banks or independent deployers who would then explain their benefits to merchants. Banks pay about 3,000 euros (US $3,910) per unit. Smaller stores would likely require only one RTM, while larger operations may seek as many as four or five, Hensley says. Banks would determine any potential surcharges, or could share costs with merchants if interchange fees came into play in certain global markets, he adds.

Potential customers have asked if they can eventually open new accounts or establish instant credit inside of the stores through the units. “These are good, new ideas that we are looking at,” Hensley says.

Development of an RTM represents another shift in how banks view staff duties in a branch or outside of the bank, says David Albertazzi, a senior analyst and ATM expert with Boston-based Aite Group.

“There are a lot of different takes on self-serve kiosks in banking, and you initially may not understand why they wouldn’t put cash in the RTM, but it does eliminate security concerns,” Albertazzi says.

Ultimately, merchant adoption of the RTM might be determined on whether the retailer can have enough cash on hand to provide the service, Albertazzi says. “The banks will have to figure out their return-on-investment with these units, and the retailers will have to figure out if it will create cash-on-hand headaches,” he adds. “These RTMs are likely best suited for a certain category of retailers, the ones that are used to handling cash as opposed to those who mainly deal with card-based transactions.”

Hensley says KAL doesn’t believe cash supplies will be an issue, as retailers regularly have cash on hand or receive cash during the business day.

However, KAL promotes the concept that retailers will lower their cash handling costs because the payment vouchers reduce the amount of money the retailer has to place in a safe each day for what can be several daily trips to make deposits at the bank.

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