This article was published on: 03/31/20

COVID-19 and the ATM Industry

by: Daryl Cornell –

One certainty is that COVID-19 has changed life as we know it forever. The fact that its direct and indirect effects will be with us for years will likely make it the seminal event of this generation. The question is whether COVID-19 will have any long-term effects on the ATM industry.

Already, pundits and politicians are raising the alarm that the U.S. depends on China to manufacture up to 90% of certain pharmaceuticals. Many other industries have outsourced production to China, putting the U.S. at risk of supply disruption for a wide variety of reasons including global pandemic. Given the large number of ATMs operating in the U.S. which have been manufactured in China, it will be interesting to see whether ATM manufacturers decide to move their production out of China or whether ATM customer buying habits change as a result of COVID-19.

To be clear, there is no risk of COVID-19 or other viruses being transferred via Chinese-made ATMs. However, it is difficult to overstate the damage to financial institutions and IADs should it turn out that ATMs or other bank hardware or software of Chinese origin could no longer be supported as a result of a pandemic, escalated trade war or other conflicts. Customer financial data, payment information and financial transactions could also be juicy targets should financial institution hardware manufactured in China be compromised as a result of industrial espionage. As accusations about who is to blame for COVID-19 escalate, the ATM industry could eventually find itself in the crosshairs. How are financial institutions and independent ATM deployers to protect themselves?

Know where your ATMs are manufactured. It’s fairly easy to identify ATM manufacturers based in China. It’s more difficult to determine the manufacturing origin of some of the ATM brands who have outsourced their ATM production to China and other low-cost countries. As ATM manufacturers continue to close U.S. plants, moving hardware production out of the U.S. to focus on software sales, a growing number of ATMs are now made in Chinese factories. Identifying where your ATMs are manufactured is the first step towards determining whether you are potentially at risk. Before purchasing ATMs or other branch automation hardware and software, find out whether these products are made in China and if so by which Chinese companies.

Insist on manufacturer guarantees. If it turns out that your ATM supplier does manufacture its products in China, insist on OEM security and supply chain guarantees.  There has been no confirmed evidence that Chinese-made bank hardware or software are influenced by the Communist Chinese government. What has been reported thus far is the compromise of Chinese-made electronics, which targeted corporate intellectual property and government secrets, not consumer or financial data. However, should compromised ATM hardware or software result in a breach of consumer payment information or financial transactions, the fallout could be extremely costly to financial institutions and ATM deployers. Given the magnitude of this risk, ATM manufacturers operating in China should assume it. If you do decide to purchase ATMs manufactured in China, insist on OEM insurance and guarantees against customer data or financial breaches.

Consider your alternatives.  While many ATMs are manufactured in China, many are not. ATM factories in Korea, Mexico, Eastern Europe and the U.S. still churn out thousands of ATMs each year. Some customers have invested heavily in Chinese-made ATM fleets. For these folks, the cost of switching brands may exceed the risk of compromise or supply disruption. For others with mixed fleets or for those considering the purchase of imported hardware and software, steering clear of ATMs manufactured in Chinese factories may be a prudent step. Whatever your situation, a wide variety of ATM options still exist to mitigate any potential threat of risk.

Enterprise risk management seems to grow more complex by the day. The aftermath of COVID-19 will only make things more complex. Understanding where your financial institution hardware, software and ATMs come from is the first step in assessing any potential exposure.

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