Optimized ATM management

Demand Forecasting Yields Cash Savings and Security for Europay Austria

The cash point or Automatic Teller Machine (ATM) is a service that many Austrians use every day without ever thinking about the complex logistics behind it. All the customer wants is for the cash machine to spit out the required sum of money. But for most banks, the stocking and maintenance of cash machines can represent a major cost and there is significant risk potential for theft and fraud. On the other hand, optimized ATM management allows Europay Austria to reap major savings and increase customer satisfaction, while reducing risk.

Optimum management of cash machines and satisfied customers
In the past, the filling of cash machines was frustrating for both the bank and the customers. The machines were filled according to what was felt to be necessary, or on the basis of the experience of the bank manager, who ideally had to remember and consider all the possible fluctuations – the day of the week, season, holidays, major events, and so on. If the person responsible for filling had incorrectly estimated the need for cash, the result was frustrated customers in front of empty cash points or excessive interest costs, since capital was tied up in the cash machines and the bank could not use it. As a result, the branch employees were often overloaded with administrative activities, which had an adverse effect on the quality of customer service.

Saving € 8.5 million (US$9.1 million) per year with the SAS solution
Europay Austria employed the consultancy company Trust Consult on a pilot project that was aimed at determining the potential for optimizing the costs of managing cash machines and estimating the repayment period. As a result of many years of successful collaboration on various projects, SAS was brought in to analyze historical management data and to develop, on this basis, a model for optimum filling. The management data from the Raiffeisenlandesbank Oberösterreich from 1999 was used for this. On the basis of the filling and interest costs, the transactional data, and the number and duration of periods when the machines were empty, an optimized filling model was worked out using SAS. A target filling for 1999 was simulated and this predicted need was compared with the actual need. By comparing the filling costs that had actually arisen with the simulated values, the potential for savings was estimated. "Every cash machine offers a savings potential of around € 3000 (US$3270), which, with 2750 cash machines throughout Austria, comes to an annual total of at least € 8.5 million. This corresponds to 0.008 percent of withdrawals, or 43.1 percent of filling and interest costs", states Christian Gihl, project manager at Europay Austria. "Empty periods can be reduced by 90 percent, and the bank is not losing any transaction fees, so it can protect its reputation with customers in the long term."

Certainty instead of estimates
If, for example, a particular cash point has always been filled on a Monday, it is probable that withdrawals remain more or less constant until Friday lunchtime and then rise steeply towards the weekend. The cash machine is often empty by Saturday evening. In the future, the person responsible for the cash machine will be able to calculate the optimal allocation at least five days before filling and will also be given an estimate for the next filling. This is already 95 percent accurate and is then confirmed or redefined no later than five days before the next filling date, which makes the work of the person responsible much easier, since he or she can always plan two filling operations ahead and does not have to rely on his or her own estimates. Because of the routes taken by the cash transport companies, fixed filling days have always been preferred. However, if banks consider the benefits of abandoning fixed days, further optimization is possible. Taking local parameters – such as festivals, sporting events and scheduled sales – into account in the analysis allows further fine-tuning to be carried out.

New filling estimates every day
From a technical viewpoint, this is a stand-alone solution. The SAS model is constantly supplied with new data via an interface and is continuously calculating new filling estimates, which are sent to the filling operatives every morning. After the model has been developed and tailored to suit, it runs almost without maintenance and Europay staff do not need any technical expertise with SAS. If any technical problems arise overnight, so that there are no results available the next morning, the person responsible for filling receives a message. A welcome outcome of this system is that this type of active data management improves data quality and the data warehouse can be used for a wide range of reporting purposes, including location/demand analyses and customer relationship management.

Europay Austria Information Center – a cash point in the intranet
One of the major challenges so far for Europay Austria has been the flood of information. Information is constantly being exchanged between Europay Austria and its local branches: allocation proposals must be sent to those responsible for cash points, and in return they must also be able to send information on events quickly to Europay Austria. For reasons of security and speed, e-mails and faxes were out of the question, but modern browser technologies have been a part of everyday business life in financial institutions for years. Finally, an intranet solution was chosen – "Europay Austria Information Center" – and, apart from the cash logistics, offers banks the following additional benefits:

• Electronic account coordination for the cash machines.
• Monitoring of machine failures.
• Recording applications for damage of cash machines and repair procedures.
• News.
• Access to electronic manuals for the cash machines.

ATMs first, then lobby cash machines
In the future, around 6000 users will be working with the "Europay Austria Information Center", and they will be joined by an additional 20,000 once the application is extended to the banks' contract partners. In the first phase, the forecasting model was tested on the company's own ATMs – Europay Austria itself operates ten cash points – and the roll-out is planned for the fourth quarter 2002. GSA (Geldservice Austria), Erste Bank/Sparkasse and Volksbank are the first financial institutions to recognize the advantage of optimized cash logistics and will now be making use of this Europay Austria service.

"An expansion of the cash logistics system to lobby cash machines is currently being defined in collaboration with the banks. This forecasting model could be used to optimize a bank's cash management for cash-issuing machines and there is plenty of potential here. If we also take the security aspect into account, it soon becomes clear that a project of this type rapidly produces the desired ROI," underlines Gihl.

Advantages for Europay Austria
While the advantage for the banks is obvious, Europay also expects the project to produce a number of internal improvements:

• Increased efficiency through faster exchange of information with local branches.
• Greater transparency, e.g. in the event of damage.
• Massive reductions in the use of paper.
• Cost savings.

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