Imaging technology at the ATM may be relatively new, but several large to mid-sized banks are taking a chance on its consumer acceptance.

Memphis-based First Tennessee Bank is launching a series of envelope-free ATMs in the Atlanta, Washington, D.C., and New York markets under its parent company, First Horizon National Corp.

The bank installed an envelope-free ATM in an employee operations center in Memphis. Marzec said the trial was surprisingly successful because the ATM experienced an 8 to 10 percent increase in the number of deposits it received.

"Before we launched into this, we spoke to some of the larger institutions that already began a pilot program. They’re seeing a 98 percent acceptance rate in the customers using it and an increase in deposits," Marzec said.

One of those banks seeing a high acceptance rate is Wells Fargo.

"About 92 percent of our customers found the envelope-free ATMs easy to use," Nicholson said. "We have not seen any erosion in deposit-making from existing customers, and we’ve been very pleased that has not been an issue."

Wells Fargo began developing its check-imaging technology two years before Oct. 28, 2004, the day Check 21 legislation was signed into law. The process included extensive amounts of customer input that eventually led to the development of "any which way" customer bulk-cash and check-deposit capabilities. The method lets a customer deposits checks and cash in any direction and in any order. The technology has led to a 70 percent decrease in customer time spent at the ATM.

While strides are being made with the wide-spread deployment of envelope-free ATMs, Meara said implementation has been slow because of costs and the recency of the technology.

"From an investment standpoint, it’s not cheap and banks have already been forced to make ATM investments. Image-capture ATMs is not a must-do and has fallen to the back of the list."

To help banks with the transition, WAUSAU developed an ATM Network Deposit Management solution that handles paper and electronic transactions. "We feel it’s important because no bank is going to replace ATMs overnight," Turner said.

First Tennessee Bank is not replacing its ATMs with the technology, but the launch of envelope-free terminals in markets outside Tennessee will save the bank construction costs.

"We’re not going to have a lot of brick-and-mortar branches, and we’re looking for something to help us grow accounts," Marzec said. "We thought the envelope-free technology would help in that endeavor."

Imaging technology at the ATM may reduce their number, but it is unlikely brick-and-mortar branches will become extinct.

"I don’t see branches disappearing or tellers disappearing," Turner said. "All of the additional new transactions have been absorbed by the ATM, but a certain amount has to be done over the counter."

The rising cost of cash is pushing FIs to focus more attention on cash-management procedures.

What's Important ISOs are renegotiating ATM contracts to balance expenses associated with rising fuel costs. More FIs are working with one-stop-shop service providers for vault-cash replenishment, service and maintenance. As a result, many FIs are regularly replenishing ATMs when the ATMs are serviced. And the advent of cash recycling at the ATM, Check 21 and the Fed's Currency Recirculation Policy are expected to reshape how the industry handles its cash .

Bob Meara, an analyst with Boston-based consultancy Celent LLC, said FIs are taking control by better managing the cash they have and placing fewer orders for more.

"More banks have invested in software to keep a closer watch on cash positions in ATMs," he said.

FIs also are filling ATMs more often with less cash, the result of working with one service provider for vault-cash replenishment, service and maintenance, said Robert Malik, senior vice president of Efmark-Bantek, a cash-in-transit and ATM maintenance provider based in Westmont, Ill. (Efmark-Bantek was created after Efmark Premium Armored Services and Bantek West Inc. merged in January 2006. It is now the U.S.’s largest independent ATM-service provider, servicing 100,000 ATMs and self-service terminals in 43 states.)

"As interest rate goes up, banks want less cash in the ATM channel," Malik said. "As an example, rather than load $100,000 every other week, they would rather load $50,000 every week. They are loading cash into the ATM more often, but overall they are reducing the cash in the ATM channel significantly."

Malik said FIs are challenging vault-cash providers to be more efficient.  

"We haven’t seen a reduction in work; we’ve seen more of a partnership approach," he said. "Because we provide cash to ATMs, we can take a greater risk and load cash in between regularly scheduled fills, which makes it much more efficient for the bank."

Vault-cash providers are adapting, but industry and regulatory developments, such as the advent of cash recycling at ATMs and the Check Clearing House Act for the 21st Century, also are expected to lessen the blow of rising costs and rates by reshaping the way vault cash is handled.

"With check imaging, banks have a greater sense of what’s been put into the ATM," Malik said. "Banks can be more efficient because they won’t have to go every day to pull a deposit."

And the Federal Reserve’s Currency Recirculation Policy, which takes effect this month, could have impact as well, Celent’s Meara said. The policy is expected to cut the amount of cash in circulation by reducing cross-shipping — the deposit and withdraw of similar currency orders made within the same week by the same FI.

Under the new policy, FIs will be charged a fee for cross-shipping, Meara said. "That could lead up to tens of millions of dollars for some of the large banks if they don’t change the way they do things."