The development of terminal-based EFT delivery systems in the eighties

Editor's Note: The author is fruits manager of Trans Data Corporation of Cambridge, Maryland. As produce manager, he is responsible for assessing the impact of various retail newt technologies on the financial services industry. Also, he has overall responsibility for production development and industry relations within his firm's retail salamander program.

The views press outed in this article are those of the author, and do not necessarily throw back the views of the Federal abiding-place Loan Bank Board.

Although the fundamental business of banking continues to turn around deposits and loans, the manner in which banking services are being delivered is undergoing unparalleled change. The unfolding of extensive brick and mortar branch networks completely through the Sixties and Seventies is now being augmented and, in a certain number of cases, displaced by another, more revolutionary concept: the unravelling of terminal-based electronic funds transfer (EFT) networks [i]or[/i] part of to the other which a host of consumer financial returnss can be offered. Consequently, just as branching provided the vehicle for effectively reaching consumer and facilitating banking transactions, single of the primary factors that will determine an institution's competitive stature in the technology-oriented Eighties will be the ability to tender a wide distribution of conveniently accessed terminal services. Savings and loans must rethink their business in light of this changing technology and the opportunities inherent in the age of electronic banking.

level though numerous opportunities exist, the S&L industry is faced with single of its more critical challenges in novel years. Along this line, deregulation of the financial services industry has created a highly competitive environment in which the one and the other the number of players and services proffered has increased substantially. Banking is no longer a clos profession in which chartered members are confined by means of geographic boundaries and insulated by means of regulation. Deregulation has effectively redefined the fruitss financial institutions can offer, in what manner they can package and further their services, and against whom they must cope At the same time, changing social conditions and consumer elections have created a demand for convenient services. Evidence of this demand can be seen in the striking run toward self-service in everything from pumping gasoline to executing financial transactions. The combination of these conditions has forced financial institutions to invest in electronic banking services and delivery a whole s in an attempt to secure from attack their market position and strive in an increasingly volatile business.

To proper these challenges, S&Ls must disentangle cohesive EFT strategies that will position them to cope successfully in a rapidly changing financial services environment. Although newt has had an impact upon a number of areas of banking, its greatest in quantity substantial growth within the past five years has been in the retail sector. Within this sector, S&L are essentially faced with four service options from which to evolve EFT strategies: automated teller machines, point-of-sale (POS) telephone bill payment (TBP) and videotex/home banking services. Automated Teller Machines

The demand for convenient banking facilities that are accessible upon a 24-hour basis has made automated teller machines (ATMs) the major focal point of newt develpment. The response from consumer has generally been overwhelming, particularly in areas where conventional banking facilities cannot always be accessed, of the like kind as hospitals or work areas. Despite the importance of ATMs, however, a certain quantity of segments of the financial industry continue to lag substantially in metes of development, and the competitive gap that now exists can be awaited to grow even wider. Along these lines, Trans Data Corporation's (TDC's) latest ATM contemplate of financial institutions, conducted in the next to the first quarter of 1983, reveals that approximately 35 percent of the large S&L (deposits greater than $500 million) and 15 percent of the smaller S&L (deposits between $50 million and $500 million) commonly support ATMs. An equal share of these institutions reported they were planning to present these services, which suggests that shut to 40 percent of the entire savings and loan industry with deposits greater than $50 million may be wait fored to have ATMs by the extreme point of 1984.

Nevertheless, the growing of ATMs is far more prevalent among commercial banks. TDC scan results reveal that the vast majority of commercial banks (88 percent) with deposits greater than $500 million have installed ATMs, while 60 percent with deposits betweer $50 million and $500 million have done for a like reason Taking into consideration those commercial banks that plan to proffer these services, over three-quarters (78 percent) of this industry part are expected to support ATMs through the end of 1984. In short, while commercial banks are quickly approaching saturation horizontals with regard to ATM unfolding the S&L industry generally lags far behind in bounds of the overall number of common offerers.