Snow Storm Clogs Cash Flow

East Coast Unprepared for Early Winter, Inaccessible ATMs
Snow Storm Clogs Cash Flow
An unexpected snow storm that set record snowfalls along the Northeast over the weekend left millions of people without power - and without access to fundamental necessities like cash.

An estimated 1.7 million households and businesses in five states reportedly remained without power Tuesday morning.

The impact has crippled some parts of the Mid-Atlantic and New England, where snow accumulation of this magnitude and speed has never been experienced during the month of October, according to the National Weather Service.

Jerry Silva, a financial security and technology consultant, says the storm is a serious concern for financial institutions.

"I've been working with a top tier bank to try to develop continuity strategies to implement during this kind of disaster, and it's not a trivial problem," Silva says. "In the wake of a much bigger disaster, like Hurricane Katrina, access to banking services, not to mention merchant services, becomes absolutely critical."

Consumers need access to cash, and more often than not, that means a need for access to functioning ATMs. When banking centers are closed, consumers turn to their next best options, ATMs. "I've been driving around all day and there are many neighborhoods without power, including one or two branches that are closed as well," he says. "In most cases, the ATMs at those branches are also inaccessible or non-functioning."

Greg Hernandez, spokesman for the FDIC, says all financial institutions have business continuity plans to address operating procedures during natural disasters such as snow storms. "As part of their planning process, they ensure that all scenarios are tested; if a scenario should occur, then financial institutions may invoke their continuity plan," he says.

But Avivah Litan, vice president and a senior analyst at Gartner, says lack of preparation on the part of consumers will lead to more problems. "Many probably don't have the cash on hand that they need. And they won't be able to get it from ATMs or grocery stores, in many instances," she says.

Even ATMs that have power and are accessible will run into replenishment issues if armored cars can't get in to fill ATM cassettes. "Communication lines are also down in many spots, so they won't be able to use their credit or debit cards, either," Litan adds.

Mobile banking also is expected to be impacted, the result of network connectivity interruptions linked to down cellular towers. And other, less technical, challenges will hurt stricken mobile access as well. "It's even more abrupt, because people without power won't be able to charge their mobile phones to even try to conduct mobile banking," Litan says. "This is a case where disaster recovery has failed in the disaster."

But John Buzzard, who tracks card transaction anomalies for FICO's Card Alert Service, says most ATMs will meet cash demands, simply because most consumers won't be leaving their homes to get cash. "A great deal of people who are normally transacting during the work week have elected to remain home, due to office and school closures," he says. "It is still possible to find fully functional ATMs, especially in places like hospitals and retail environments that have electrical-grid priority."

Lessons Learned from Other Disasters

The proliferation of ATMs and large networks should ease some of the cash scarcity. Lessons the industry has learned about vendor management during other natural disasters also has helped. In fact, vendor management is one area that's seen vast improvement in recent years, says Donald Saxinger, the Federal Deposit Insurance Corp..

See Also: 6 Categories of Modern Threat Landscape | Empowering Business Continuity for Cyber Resilience

"Banks do disaster testing," Saxinger says. "[But] if we do these in a vacuum and not work together to do this testing, some weaknesses might show themselves. As we saw a couple of years ago, we had some ice storms in Kentucky and the communication lines went down between the banks and their service providers. Even though we had business continuity plans at both ends that worked, we had difficulty implementing certain aspects of it, particularly in updating the daily balances to the service provider. And that caused a few issues with some of the banks trying to manage their liquidity."

In 2008, the FDIC, through the Federal Financial Institutions Examination Council issued the Business Continuity Planning Handbook, part of the FFIEC's IT examination series that covers banks' reliance on interdependencies.

"We have core service providers that do business continuity testing and disaster testing," Saxinger says. "[But] is it just a regional backup? Do they back up nationally? Is there a physical backup?"

2004's Hurricane Katrina also taught bankers lessons, especially where massive ATM outages are concerned. When New Orleans took a cash hit from an angle it was not expecting, the city was quickly crippled, financially and fundamentally.

"Cash was king, because many merchants were without power, making POS [transactions] impossible," Silva says. "However, cash was hard to come by. ATMs everywhere were without power, some even washed away into the Gulf, and those that had power were soon emptied by customers - and replenishment was difficult to impossible, given the conditions."

But transaction networks and data centers, including those that drive ATMs and transactional switch systems, now have generator backups and backup sites located miles away, sometimes in other cities. If disaster strikes home, then backups in unaffected areas can pick up the load. "The networks themselves continue to function, even in the event of power loss," Silva says. "The loss is therefore limited to smaller areas for the kind of event we had here this weekend."


About the Author

Tracy Kitten

Tracy Kitten

Former Director of Global Events Content and Executive Editor, BankInfoSecurity & CUInfoSecurity

Kitten was director of global events content and an executive editor at ISMG. A veteran journalist with more than 20 years of experience, she covered the financial sector for over 10 years. Before joining Information Security Media Group in 2010, she covered the financial self-service industry as the senior editor of ATMmarketplace, part of Networld Media. Kitten has been a regular speaker at domestic and international conferences, and was the keynote at ATMIA's U.S. and Canadian conferences in 2009. She has been quoted by CNN.com, ABC News, Bankrate.com and MSN Money.




Around the Network

Our website uses cookies. Cookies enable us to provide the best experience possible and help us understand how visitors use our website. By browsing govinfosecurity.com, you agree to our use of cookies.