Interactive Teller Machines (ITMs) represent a major shift in CIT carriers’ operations and that entails an added set of risks. In a global sense, ITMs offer an opportunity to expand a portfolio of cash management services that can make a CIT carrier even more important to a banking system. The rise of ITMs expose carriers to banks’ evolving policies on the use of ITMs within their own operations. This is a risk to which carriers can only adapt as banks’ operations become clear.

Beyond this, there is a set of specific risks that accompany ITMs. These risks are inherent in the flow of cash through the CIT system and changes in policies and procedures will be required to manage them so that the expanded cash management services are profitable. Here are 5 key ITM servicing risks that must be included in the CIT carrier’s risk management planning:

1. Loss of Life

By their actions, some people put a monetary value on life. This is incomprehensible to most of us, but it is a fact. The large amount of cash in a carriers’ truck or vault has always been a magnet to a few who will risk everything for a big payday. The advent of the ITM does not change this, though it may make the exposure even larger.

The reason we look at the extreme risk, loss of life, is because it focuses our attention on the fact that carrier’s risk evaluation and mitigation demand a comparably extreme approach given the potential catastrophic loss.

2. Increasing Violence

There is evidence that the extreme risks carriers face are increasing. Robberies are initiated with a drawn weapon more and more often. Robbers know that their “adversaries” are also armed, so the very fact that they persist in the attack indicates they are willing to use deadly force.

All carriers train extensively for these potentially violent encounters. The ITM poses challenges that make this even more important.

3. Servicing Complexity

ITMs offer customers greater flexibility in cash services and a wider range of transactions, up to and including opening new accounts of certain types. All of this makes the spot audits, transaction history, cash servicing, and record keeping more complicated. This all takes more time to service than the traditional ATM.

Greater time in service means the carrier crew is exposed to attack for a longer time. When more than one ITM is serviced in sequence at a single location, this effect is magnified. Carriers’ risk mitigation policies need equally robust improvements to accommodate the more vulnerable circumstances.

4. Organizational Fraud

The interactive feature of ITMs is one of its most attractive benefits. However, it sometimes means that a remote employee has to attend to a customer for a certain kind of transaction, such as identity verification or to explain and authorize a transaction. That means there’s a person on the “inside” who has access to some aspects of the cash management system, with a corresponding potential for fraud.

While this is in some sense the bank’s problem, carriers will often be held accountable for the failures that do occur. On the positive side, carriers can use this as an opportunity to deepen their cooperation with their banking partners.

Of course, another source of fraud is the CIT carriers’ own employees. ITMs require new internal controls and audits to address the new risks they pose.

5. Labor Shortages

Every CIT carrier already knows there are precious few employees and potential employees who can handle the high intensity risk of cash management with intelligence and calm. The currently tight labor market doesn’t help, and ITM complexity and service demand could make the situation even worse.

This risk has to do with the character and capability of employees and applicants. A very thorough background check can help, followed with intensive and on-going training. Given the high value of a tested and trusted employee, the premium on retention should be a special focus.

CIT carriers have always operated in a risky environment, so in one sense the addition of the ITM is business as usual. But the ITM is something new on the carriers’ routes, with a tighter integration to banks’ internal processes and a new class of risks built on the decentralized capabilities of the machines.

For a more thorough overview of how ITMs are changing CIT carriers’ operations, download A CIT Carrier’s Guide to Building Your ITM Program.

It was not too long ago that CIT carriers operated armored vehicles with armed guards carrying cash from one brick-and-mortar facility to another. With the introduction of Automated Teller Machines (ATMs) in 1969, the role of carriers changed to increase the carriers’ responsibilities in the distribution of cash to numerous types of facilities and settings.

Over time, changes in regulation, widespread internet and digital networks, and new banking practices led CIT carriers to become active partners in the financial system, specializing in cash management. Cash-in-transit carriers touch every point in the system where cash is in circulation.

This evolution continues today with the increasing adoption of ITMs (Interactive Teller Machines). Like disruptive technologies in many industries, the ITM is built on an interactive platform of digital information traveling over redundant networks. Unlike many disruptive technologies, the ITM continues to depend on physical locations and person-to-person communication. It is a unique combination of digital, human, and location factors that require CIT carriers to adapt to newly complex service requirements.

Adapting to the Greater Capabilities of ITMs

With all ITMs have to offer, they require changes in standard ATM operations by CIT carriers to accommodate the greater variety and sensitivity of transactions. The core uncertainty for an ITM program is that these relatively new machines do not yet have an established niche. Banks and credit unions use them in different ways as they explore and learn how to profit from them, and these variations make it more difficult for carriers to develop routines that can be tested and proven. Coupled with the normal turnover of employees and the difficulty of finding qualified employees, carriers face changing circumstances in a number of ways that make risk management more challenging.

Some specific characteristics of ITMs pose great risks to carriers. Since these machines feature a wider array of services, such as check cashing, they must carry more varieties of cash, including coin. Checks are often written in amounts that require small bills or coins to cash, so the cassettes and coin loaders used are more varied. Documentation of transactions has to be retrieved and secured. And since ITMs offer a cost-effective solution to serve out of the way or rural locations, the protection of eyes on the street may be minimal.

Adapting to a Variety of Banking Models

Bankers sense a big opportunity in ITMs, though the exact nature of the prize is sometimes not quite clear. Basically, they believe the ITM will allow them to replace expensive employees who need to be home with their families with ‘smart’ machines who never tire and do not make mistakes on simple routine transactions. However, the exact way these new machines will fit into a banking system varies.

Some larger banking systems have found themselves with too many retail outlets in some areas where they have acquired other banks. They want to shrink the expensive brick-and-mortar outlets without losing customers. One way to do that is to increase the number of ITMs, depending on customer receptivity. If they can make this work, it could actually increase the number of locations where a bank has a brand presence, but that will make a more difficult route for the carrier.

On the opposite side of the coin, ITMs may offer an alternative to a regular outlet in rural or urban under-served areas. Again, these can make the carriers’ routes and service routines more complicated and time-consuming.

CIT Carriers as the Complete Banking Partner

In order to continue as the all-purpose cash management partner, CIT carriers will need to develop new service routines to match the ITM’s capabilities and to provide the reliable cash controls banks demand.

Download a copy of our latest guide, A CIT Carriers Guide to Building Your ITM Program, to get a full overview of this growing component of cash management.

Interactive Teller Machines (ITMs) are proving to help solve many of today’s retail banking challenges and are becoming more prevalent as a result. This rise is changing the landscape for banking, and equally, for the cash servicing and cash-in-transit industry.

ITMs are on the rise for a number of reasons. Perhaps most significant is that ITMs can serve many customers’ needs (up to 80% of typical retail transactions can be completed by today’s interactive tellers) and reinforce the brand at a lower cost than a human teller. This allows ITMs to be used in situations where the traditional brick-and-mortar bank is too expensive to build and operate or is simply impossible for other reasons.

There are several situations where banks find ITMs a compelling solution.

Addressing industry consolidation.

Consolidation in the banking industry is leading to over-banked locations where banking systems are merging and their markets partially overlap (think of Wells Fargo’s acquisition of Wachovia during the Great Recession). With their interactive capabilities and wide range of services, ITMs can provide a good substitute for a human walk-up teller for many transactions. Where branch locations have to be closed, the ITM can carry on the bank’s functions at a much lower cost and continue to serve that local market.

Serving remote locations.

Rural banks often find ITMs a good way to project a presence in remote locations and capture new customers at a lower cost. These banks were among the early adopters of interactive tellers and continue to expand the use of them.

Expanding the bank’s presence.

At the other end of population density, ITMs can be a good option for a bank that wants a retail presence in every shopping mall or airport. These walk-up tellers offer on-the-fly banking convenience to a population that is time-challenged and unlikely to make special trips to a traditional outlet.

Serving the unbanked.

Finally, ITMs can help banks reach the unbanked. This is actually a serious social problem in some areas, barring people from getting the kind of track record they need for a good credit history or for a secure way to manage money. The ITM can sometimes be the safer and cheaper option to a payday lender.

As you can see from these examples, banks have a lot of different reasons to expand the ITM network. However, the presence of ITMs is also shown to increase the risks of CIT carriers. First, there are machines in a variety of locations, which demands an understanding and response to a variety of risks. Banks will have a wider range of policies and procedures that need to be accommodated. Carriers will confront more challenging physical environments where typical mitigation measures may be inadequate.

Furthermore, the ITM machines themselves pose new threats. Since they have much wider service capabilities, they demand more intricate and time-consuming servicing than ATMs. Consider a typical deposit image ATM with a total service time of 12-15 minutes to complete the cash swap, cash deposit pull, imaged check retrieval, receipt paper change, captured card processing, etc. with the management of three receipts and typically one or two denominations. In comparison, ITM service time extends to 18-22 minutes with additional bagging procedures, management of coin, additional denominations inclusive of $100 notes, and up to eleven receipts to manage. This level of exposure and service time increases even further when you consider the security impacts of servicing ITMs in drive through lanes where ITMs are stacked or back to back with one another.

The rise of the ITM is an opportunity for CIT carriers to expand their role in the cash management system. As with most opportunities, there are embedded threats as well. The carriers who can learn to mitigate the added risks will reap the rewards.

To learn more, get a copy of our CIT Carrier’s Guide to Building Your ITM Program.

The role of CIT carriers in banking continues to expand with the on-going growth of Interactive Teller Machines (ITMs). These newer teller machines will not replace the venerable ATM, but they will fill important niches in banks’ retail strategies. CIT carriers that aim to maintain strong partnerships with banks will add ITM servicing to their cash management capabilities.

Integrating ITM services poses several challenges to CIT carriers, which require new policies and a revised risk management plan.

• Different banks will find different uses for ITMs. A CIT carrier will be put into a reactive mode to adapt to bank policies and may have to adapt to several policies if it services more than one banking system.
• ITMs expand the capabilities of teller machines. The added capabilities increase the complexity of routine services, putting demands on carrier employees to maintain performance standards.
• ITMs cause greater exposure to a number of risks, some of which will be familiar to carriers that service ATMS, but more varied and in some ways more intense.

Building a successful ITM program will require carriers to redefine and address the risks that come from the teller machines, with the added complexity that ITMs will almost invariably require the carrier to be more integrated into banking systems. Some of the added risks are part of the integration, so the banks themselves need to be clear about the risks and how the carrier will manage them.

Our new whitepaper, A CIT Carrier’s Guide to Building Your ITM Program, will help you organize a systematic approach to service quality and risk management in the ITM environment. Download the paper now and review your policies and practices to ensure you remain on the front edge of cash management.