tah-based America First Credit Union first offered check cashing at ATMs to help it overcome a quirk in state law that stymied its efforts at expansion. Until May of 2003, when it obtained a federal charter, America First could only build branches in one county, but it was allowed to locate ATMs and loan origination offices throughout the state.

America First surveyed members at its busiest branches to find out which transactions were most in demand. "An enormous percentage" of them visited branches to cash checks, said Chad Lynch, the FI's ATM Services Manager. With help from Diebold, its ATM vendor, the FI rolled out check cashing at a handful of ATMs.

Moving Forward

Based on the popularity of those machines with its members, and with the October passage of Check 21 as an added incentive, America First now plans to introduce the functionality on more of its 85 ATMs. "It's absolutely going to be a big part of our future," Lynch said. About 18 months after check cashing was added to three ATMs located near Brigham Young University, members cashed more than 200 checks a week at those machines. An ATM at an America First branch in a Wal-Mart store has bested those numbers, Lynch said, with 45 check cashing transactions in its first week.

Members feed checks, sans envelopes, into the ATM depositor. Images of the check are displayed on the screen during the check transaction for members' validation. Then, at the conclusion of the transaction, the image of the check is printed on the receipt. No fees are charged for check cashing, which is offered only to America First customers. In addition to check cashing with cash back to the dollar (any change is deposited into the cardholder's account), transactions include check cashing with deposit and check cashing with bill payment (to a loan or other America First account). Customers can get cash back with any of the transactions.

All checks are cashed, with the exception of those written from accounts the FI believes are questionable. "We compare the MICR line data to a list we maintain," Lynch said. America First is adding Diebold's Intelligent Depository Modules (IDMs) to more of its ATMs, Lynch said. Thirteen machines now offer the service, and the FI is ready to introduce nine more.

A few of the check cashing ATMs remain on an OS/2 platform, though Lynch said America First intends to convert some of them to a Windows-based platform to get the latest version of the character recognition software. After experimenting with check cashing on Windows-based machines, America First opted for OS/2 in the interest of getting the new transaction to market quickly.

"We experienced some pain with the earliest Windows-based ATMs," he said. "That's improving now as everyone gets more familiar with the technology." According to Diebold, IDMs may be added to the third generation of its ix Series ATMs as well as its new Opteva line.

Increased Interest

Diebold has sold some 3,000 IDMs since it introduced them in 1991. Interest in check imaging at the ATM has been rising in the past year or two and especially since the passage of Check 21, said Laura Drozda, a Senior Product Manager for Diebold. "The ATM is a great place to start check imaging because you can save money and increase customer satisfaction at the same time," Drozda said.

The ATM is one of the most popular banking channels, clocking 14 billion transactions in 2003, with the runner-up, inside-the-branch transactions, totaling 12.5 billion. Consumers have consistently expressed interest in cashing checks at ATMs, with 70% of them saying they would do so if the service was available, according to Diebold market research.

Yet FIs hesitate to offer check deposits, much less check cashing, because of increased service/maintenance costs, especially at off-site machines. Traditionally, checks must be collected from ATMs every day for FIs to process them. According to Dove Consulting's 2002 ATM Deployer Study, fewer than 17% of FIs consistently offer deposit service at off-premise ATMs.

With image capabilities and envelope-free deposits, however, FIs could transmit images to their back offices and postpone check pick-ups, timing them to coincide with cash runs. While America First does not yet transmit images to its back office, Lynch said it plans to do so as it revises its check handling policies with Check 21 in mind. "We're going to save a ton of money by not making vendors go out to the machines every day," he said.

More frequent replenishments may be necessary for ATMs offering check cashing, however. "It all balances out" for America First, Lynch said. "I may have to bump the cash levels at the ATM at that Wal-Mart. But the cash levels are also probably going to go down at the branch."

A potential cost savings, while attractive, isn't the primary reason the FI is offering the service. "It's not for us, it's for our members," Lynch said. "Wherever they are, we want to give them full access to their accounts. Providing the best possible service will bring us more members, which will ultimately keep us healthy."

A Few Concerns

The next nine America First ATMs to add check cashing are drive-up units, a minor concern for Lynch, as branch personnel may not be readily available to answer any customer questions about the new transactions.

"We don't want our members to get frustrated if the transaction doesn't work for some reason," he said. An envelope deposit "always works" for the customer at the machine, but there are occasional problems with imaging, for instance, if a scanner rejects the check because handwriting is illegible. Improved customer awareness will ensure that members don't balk, Lynch believes.

"It's a lot like using a PC," he said. "You can get frustrated with new technology until you understand the possible glitches that may occur."

Unlike some other FIs that have experimented with check cashing, America First does not display the amount read by the scanner to an ATM user and ask him to confirm. Instead, a customer gets three opportunities to enter the amount; the check is returned to him if no match results after three tries. When America First first introduced check cashing in 2002, it experienced a 75% match rate, Lynch said. With rapidly improving character recognition technology, the match rate is now 95%.

End-to-end Imaging

Diebold is gearing up for Check 21, which will go into effect in October 2004. The manufacturer has established a strategic relationship with technology provider Alogent, whose customers include Barclays and Lloyds TSB, for its image handling expertise.

Alogent will implement two of its existing products, used to capture images at points of physical payment such as branches and process items in the back office, with Diebold's ATM application and IDM. The resulting system, called ImageWay, facilitates end-to-end image processing, Drozda said. Original article: www.atmmarketplace.com/research.htm?article_id=19304&pavilion=152&step=story