he ATM infrastructure is overdue for an overhaul. As Kent Phillips, Director of Business Development for network services provider Transaction Network Services (TNS), puts it: "ATM manufacturers have upgraded their products with more powerful processing engines, but many deployers are running into traffic jams trying to drive them on outdated network information highways."

Despite all of the Web-enabled possibilities of the newest generation of ATMs, most machines still communicate using 30-year-old networking protocols such as SNA (Systems Network Architecture), which was originally developed by IBM for its mainframe computers in 1974.

Adding third-party transactions to ATMs-a la 7-Eleven's Vcom program-is a challenge because it's so difficult for new transaction providers to connect to ATMs through the traditional infrastructure, Phillips said.

IP Uptake

As ATMs become more PC-like and open architecture software offers the ability to create content based on HTML and other Web languages, some deployers-especially financial institutions and retail chains including 7-Eleven-are configuring their ATMs to communicate via IP, or Internet Protocol.

IP is a ubiquitous protocol that works with most local-area network (LAN) or wide-area network (WAN) configurations. It is typically combined with a higher-level protocol called Transmission Control Protocol (TCP), which establishes a direct connection between the sender and the receiver (TCP/IP).

In contrast to legacy protocols like SNA and 3270 bisync, "IP is here to stay," Phillips said.

Indeed, IP has become a de facto networking standard for PCs, and also supports devices as diverse as cell phones and cable set-top boxes. It is the standard way of communicating with the Internet via an Internet Service Provider (ISP).

Many financial institutions (FIs) already connect their teller stations, check-imaging systems and other PC-based devices via IP. Each branch is configured as a LAN that connects to a WAN at a main branch or other central site, most often using a frame relay backbone.

Retail chains connect devices such as point-of-sale and credit card terminals, inventory systems and other devices via IP. Each store is a LAN that connects to a WAN at corporate headquarters or another site, also typically via a frame relay network.

Forecast for Clouds

In a legacy world dominated by SNA and other legacy protocols, Phillips said ATMs typically connect to their host via dedicated connections, leased-line in the financial services world and dial-up in the retail world. The host serves as a hub, and the individual ATMs are spokes connecting to it.

In contrast, he said, TCP/IP is a "cloud with spokes on the edges." The data is separated into "packets" of information that are re-assembled at the host.

There is little danger of data not being delivered. All data sent via TCP/IP has an IP address to ensure it ends up at the right destination.

Unlike leased lines, TCP/IP offers "redundant communications paths," said Bill Jackson, Triton's Chief Technical Officer. "There are a hundred different ways for the data to get where it's going. With leased lines or dial-up, if the local telecoms go down, you're dead."

Triton recently created an IP "converter" for its 9700 series of ATMs. Jackson said a field upgrade, with the converter and added software, costs "a few hundred dollars." IP capability is built into Triton's newest machines, the 9800, FT5000 and RT5000.

Triton distributor eFunds [in early 2003] piloted two 9705 model ATMs on IP at Bigfoot gas station/convenience stores. eFunds and Mac's Convenience Stores, owner of the Bigfoot chain, then decided to increase the number of ATMs on IP to 380 sites.

Cost Control

Jeff Bippus, Mac's Senior Business Manager, said Mac's saw it as an opportunity to streamline its operations by eliminating the telephone lines that were used for dial-up ATM connections. Removing the monthly expense of $50 per location adds up to a significant savings when multiplied over hundreds of locations, he said.

"Telecommunications is really coming into its own as a cost reduction opportunity," agreed David McCrary, eFunds' Vice President of Sales, ATM Solutions.

Each IP location (LAN) must have at least one router, at a cost ranging from a few hundred to a few thousand dollars, but each router generally can support multiple devices.

Another benefit, McCrary said, is faster transactions. Because IP is an "always-on" connection, its speed is more akin to a leased line than to a dial-up line. Transaction authorization typically occurs in three to five seconds, versus 15 to 20 seconds for dial.

That's particularly important during peak times in retail environments, such as the 6 a.m. to 8 a.m. and 5 p.m. to 7 p.m. "drive times," McCrary said.

Mike Cowart, Operations Director for ATM Services for transaction processor Lynk Systems, said that a Lynk client, an ISO, experienced problems with queues forming at two ATMs in a casino, both doing in excess of 8,000 transactions a month. The ISO switched to IP to reduce waiting times at those machines.

Freeze Frame

Triton's Jackson said that large chains, which typically already have a frame relay network, are the most logical retail candidates for ATMs on IP. "This isn't really the solution for mom and pop," he said, although IP can be routed through more affordable connections, such as cable or ISDN.

Indeed, for customers who have made an upfront investment in frame relay, it makes sense to move as many devices as possible to IP, said Allen Christopherson, Eicon Networks' Marketing Manager for the Americas.

"If you've got a frame backbone, you're paying a fixed cost for it every month, whether you're using 10% of the capacity or 100% of the capacity," he said.

While frame relay is a popular vehicle for IP because of its ubiquity, eFunds' McCrary thinks the number of IP-enabled devices running on DSL, VSAT (satellite) and other communications options will grow as those technologies become more popular.

Increasing the Uptime

Switching ATMs from dial-up to IP makes monitoring less costly and more efficient, said Triton's Jackson. This is an important issue as ISO networks continue to grow through consolidation.

"We've got ISOs monitoring thousands of machines with our Triton Connect software. They'll have eight modems with separate phone lines. They could run IP through a single T1 line or cable connection instead," he said.

Lynk's Cowart said enhanced monitoring was one benefit enjoyed by the Lynk client with the casino sites, after he switched several Diebold 1064ix ATMs from dial-up (911/912 emulation) to IP.

"NCR and Diebold offer only a limited subset of status messages with dial-up," Cowart said. "Your uptime improves dramatically if you move to IP because you get more status messages."

Banking on it

Adding ATMs to an existing IP infrastructure also offers a score of benefits for FIs. Ted Josephson, Vice President of eBusiness and Operations for Bridgeport, Conn.-based People's Bank, said his bank improved its transaction capacity at its 212 branch ATMs by converting them from leased-line connections to IP. This was a significant issue for People's, since a third of its machines crank out more than 10,000 transactions a month, he said.

IP's reliability and resiliency is also a "quantum leap over SNA," Josephson said. Though the bank once experienced problems with strings of ATMs going down if one went offline, he said that hasn't occurred since People's switched to IP.

While Josephson characterized People's as a "fast follower" when it comes to introducing new functionality, the switch to IP "positions us well for the future," he said. "My telecom costs are already depreciating. So I won't have to take a big hit for telecom as we create a migration path to Windows-based ATMs."

Josephson said he is currently plotting a strategy to convert his 24 non-branch ATMs to IP. "It seems pointless to keep separate network protocols and related support in place for 24 machines."

Primary conversion costs include adding Ethernet cards to ATMs and routers to each site, Josephson said. Some older ATMs may require core upgrades, with a faster processor and more memory, to support IP connectivity.

No ATM Is an Island

For Boston's FleetBoston Financial (acquired by Bank of America in April 2004), upgrades to IP are part of the bank's conversion to a Windows-based, advanced ATM platform, said Jim D'Aprile, Fleet's Vice President of ATM/Self-Service Banking. So far, 100 of its 3,600 machines have been converted to IP, all at branches.

Fleet is considering converting some non-branch ATMs to IP as well, D'Aprile said, though only at high profile, high-traffic locations. One of the key advantages to IP, he said, is that it makes ATMs an integrated part of a bank's retail delivery platform rather than a stand-alone channel.

"There's no point in adding new functions if your ATMs are totally isolated from your other channels," he said. "Even if you have a Windows-based operating system, you just can't get to the stuff."

D'Aprile said that Fleet adopted the somewhat unusual approach of maintaining its SNA connectivity along with IP, so that standard ATM transactions could continue to flow through ACI's BASE24 to a Tandem server.

"We didn't want to re-invent the wheel," he said. "We're in a position to be flexible as we move forward, so it's possible we may change our approach as the market begins to manifest itself."

Curiosity Got the Deployer

Kevin Carroll, Director of ATM Products for transaction processor Concord EFS, said there has been "a definite increase in curiosity" about IP among Concord clients in the past year. He credits the increased interest to early adopters' moves to Windows-based ATM platforms and the dawning realization that the ATM can be a strategic delivery channel.

Concord runs several thousand ATMs on IP today, and has four fairly large clients that are considering going network-wide with IP, Carroll said.

IP will facilitate new ATM transactions such as envelope-free deposits, Carroll said. "With Check 21, you've got people taking baby steps toward shipping digital check images from the ATM to the back-office imaging system-which is on IP. In the enterprise world, IP is the way to communicate."

IP will virtually eliminate the need for "sneakernet," the practice of visiting each ATM site to manually download new software, Carroll said.

He predicts this will become more important as more ATMs move to a Windows-based platform. "Just think if you had to visit all of your ATMs every time a Windows security patch came out," he said.

However, cost is a factor. Most financial institutions cannot afford to upgrade all of their devices to IP, said TNS' Phillips. "They're generally going to get their branch and back-office stuff on IP first, then begin looking at their ATMs."

Making it Secure

Security is a concern with IP because, unlike leased-line or dial, it doesn't communicate with ATMs via a dedicated connection, said Greg Peoples, Eicon's Senior Systems Engineer. Firewalls, secured servers and other measures are "critical," he said.

People's Josephson said that most deployers have already reinforced their security systems. "I'm running my entire branch network as a WAN over TCP/IP. I've already solved those issues."

Similarly, in the retail world, "millions of dollars worth of transactions are already routed through those systems today," said eFunds' McCrary.

TNS can route IP transactions through its proprietary IP data network or via a fully managed VPN. All IP addresses are encrypted so they are never in the clear.

"It starts out as ABC, then is converted to XYZ so it can't be traced back to source," Phillips said. "If they don't have the right ID, they're not going to get in the door."

Most banks will continue to support a number of legacy ATMs even as they introduce new IP-enabled machines, Phillips said. So TNS, Eicon and others offer products that alter communications protocols, translating them from IP to X.25 and back again as messages move between ATMs and the host.

TNS also provides consulting services, helping deployers determine which forms of telecommunications are most appropriate with IP, how many routers are needed to handle transaction volumes and other key decisions.

Outside expertise is often welcome in environments where those experienced in X.25 protocols outnumber those savvy in IP protocols, Phillips said. "Migrating to an IP infrastructure isn't only about hardware upgrades. It requires knowledge upgrades as well to successfully deploy and manage it."

IP Defined

IP, abbreviation for Internet Protocol, pronounced as two separate letters. IP specifies the format of packets, also called datagrams, and the addressing scheme.

Most networks combine IP with a higher-level protocol called Transmission Control Protocol (TCP), which establishes a virtual connection between a destination and a source. (Source: www.webopedia.com .)

IP by itself is something like the postal system. It allows you to address a package and drop it in the system, but there's no direct link between you and the recipient. TCP/IP, on the other hand, establishes a connection between two hosts so that they can send messages back and forth for a period of time.

Original: www.atmmarketplace.com/research_story.htm?article_id=16201&pavilion=17