Automatic Teller Machines are such a fixture of everyday life that we forget how much of a pain it used to be to make simple banking transactions.
Introduced some 40 years ago, the ATM now sprawls across the U.S. with more than 400,000 machines, and they’re everywhere as we go overseas too; all put in place to give us the cash we want when we want it. We can even ask for one-dollar bills, make envelope-free deposits, and receive stamps.
They’re so common that we also tend to forget there’s actually a complex computer working there – a screen, keypad, user interface – and inside there are processors, memory, and communications hardware.
Every single one of these ATMs run on an operating system (OS), and of those, as much as 95 percent of all ATMs today run on Microsoft’s (NASDAQ: MSFT) Windows XP OS.
Support for Windows XP is ending on April 8, 2014. That’s the day Microsoft cuts the cord on Windows XP tech support: no more regular security patches, and no more compliance with industry standards.
That isn’t to say Windows XP is going to stop working. It will keep running as it has for the last thirteen years. However, it won’t meet new or existing regulations, and that will necessitate a generational shift. ATMs will need to upgrade systems to Windows 7 or 8, most of which will use the more familiar Windows 7, available since October 2009.
It used to be that most all ATMs were run on IBM’s (NYSE: IBM) OS/2. That changed in the early 2000s when IBM phased out and eventually ended support for its software. That’s also when ATM terminals upgraded to the Windows XP-based systems, and that’s the way it has remained ever since.
OS/2 worked great: nobody ever got hacked. It was simple and efficient. XP though, is a more complex system and opens the door for online criminal activity. On one hand, XP is good because it offers more functionality and possible applications, but its vulnerability is what pushes the need for an upgrade.
So, that’s what banks and credit unions from all over are supposed to be in the process of doing right now: making the switch to Windows 7 before the April 8 deadline.
The Shift
It’s a tall order, but the ATM industry has faced adversity like this before. They did it in the early 2000s with the OS takeover from IBM; again in 2002 when new encryption standards became mandatory, and in 2011 when banks had to upgrade audio technology for the Americans with Disabilities Act.
There’s also a deadline in 2015 that will require all bank cards to be secured with a microchip. If we look at what recently happened to Target (NYSE: TGT) and the 40 million or so card holders who had their information stolen, we start to see the importance of a strong wall against online criminals. That’s why in the long-run, every ATM must be broken down and rebuilt.
But it’s hard. If a financial institution finds itself non-compliant with payment card industry (PCI) requirements – i.e., not operating under Windows 7 by April – that institution could face an audit, resulting in fines of thousands of dollars, which would all but fold some small financial businesses.
Still, many will not be prepared for April 8. Even if they want to, a company budget, performance, and compatibility issues may slow the process down. And those who are, or will be ready, face added dangers that come along with a new OS.
You probably didn’t notice, but the ATM industry was hurt pretty badly after the Americans with Disabilities Act forced new changes. It bounced back, and hopefully we’ll learn from some of those mistakes.
Still, some people simply don’t understand what they’re operating, or if they do, what to do about it.
We could easily see only a 15 percent shift to ATMs operating on Windows 7 by the April 8 deadline.
That means, machines will largely go unsupported by old software and leave them vulnerable to hacking, or that business can turn to somebody with the answers.
The Players
Companies like Axis, a technology-driven company founded in 2000 that develops innovative products and solutions for its customers. Its Linux-based OS can provide brand new ATMs for the needed efficiency and confidence desired by both business owner and end-user, alike. It also has developed a biometric retrofit kit for ATMs that is affordable and addresses the needs for advanced ATM systems.
Phoenix Interactive is another. They are the world leader in Window-based multi-vendor ATM software. For more than two decades, Phoenix has been there to assist in financial and banking needs for competitive banking around the globe.
The most notable companies are the ATM makers themselves, like NCR Corp. (NYSE: NCR) of Duluth, Georgia, largest ATM supplier in the U.S. They offer products and services that connect consumers to businesses, and have also been making moves by acquiring Ratalix Ltd in 2013 and Digital Insight Corp. earlier this month.
Diebold Inc. (NYSE: DBD) also delivers self-service machines and services to places of business all over the world.
And there are many more looking to capitalize on the upcoming shift.
The Future
The question now is: what will our financial institutions do?
The cost to upgrade a single ATM to Windows 7 can cost anywhere from a few hundred dollars to a few thousand dollars, depending on the hardware.
We still don’t know how security issues will be addressed as the deadline approaches, and it’s anybody’s guess just how vulnerable systems stuck behind will become.
What we can expect to see as ATMs do advance is the added benefit of features like touchscreen interaction and a more self-serving approach to banking.
And the technology will extend to all sectors and industries of business. We will see an individual’s physiological and behavioral characteristics take shape and become integral parts of business transactions.
Our money will be safe, business will prosper, and the companies mentioned here will all be there as it happens.
