While envelope-free ATM deposits present some operational difficulties, they also offer banks an “opportunity to redefine self-service delivery,” according to speakers at BAI’s TransPay Conference & Expo in Orlando.

Speaking at a Monday session entitled “Deposit Automation at the ATM,” representatives from a bank, credit union and solutions provider offered their perspectives on the effort it takes to mount and support a successful ATM image-based offering. While they noted that the technology can require new training and IT support and potentially other procedural adjustments, they also touted a reduction in long-term costs and potential competitive benefits.

Mike Marzec, senior vice president for strategic planning and manager of electronic banking for First Horizon National Corp. said the Memphis-based bank has been piloting envelope-free deposits since August 2006 at three ATMs. He said First Horizon was encouraged to do this by its positive experience with remote deposit capture over the past four years and a desire to keep up with the market. “Our competitors have rolled out similar products,” Marzec said.

Based on anecdotal experience, First Horizon’s three revamped ATMs are seeing between a 5% and 10% increase in usage while the reliability of the check image scan has improved from the “mid-90% range” to 98%, Marzec said. Customers and employees who piloted the technology are reporting a 90% satisfaction rating, he added.

Peg Bost, director of market development and deposit automation at North Canton, Ohio-based Diebold, Inc. said envelope-free offerings can win over consumers who don’t normally deposit at the ATM. She cited a 2005 Synergistics Research Corp. study finding that 58% of consumers who did not currently make deposits with an envelope at traditional ATMs would be receptive to doing envelope-free deposits.

The reason: consumers liked the idea of seeing the check image on the screen or the receipt or, in some cases, because their funds are available sooner, Bost said. She added that when Diebold financial institution clients offer envelope-free deposits, they report that anywhere from 20% to 55% of their customers’ currency or check deposits migrate from the branch teller to the ATM.

In terms of cost benefits, Bost said Diebold’s research shows that the envelope-free deposit costs the financial institution just 40 cents, because there’s no need for courier service or someone to open the envelope in a back office. By contrast, industry statistics indicate that it costs $1.70 on average for a bank to receive an ATM deposit in an envelope, although Diebold estimates the true cost is closer to $2.50 per deposit, which would make it as expensive as a teller transaction, Bost said.

Marzec said First Horizon had encountered some operational problems with envelope-free deposits. For example, since deposited currency is all dropped into one area, without an envelope to separate different deposits, it’s more difficult to weed out dubious transactions (and the customers who made them) after the fact. As a result, the envelope-free ATMs will automatically return any “suspect” currency, he said.

Also, Marzec pointed out, the machines reject about 8% of checks because their background designs or colors might obscure writing on the check or, in the case of some non-traditional checks, the layout of the check makes it hard for the software to decipher.

For example, the configuration of some checks, such as insurance or rebate checks, does not match the traditional check, he said.

(For more on this imaging ATM deposits, see “The Few, the Proud, the Image-Enabled” in the May/June 2006 issue of BAI’s Banking Strategies.

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