By Steven ReiderAs in-branch teller activity continues to wane, bankers have increasingly sought ways to reduce operating costs. One prominent tactic involves the use of interactive teller machines. Also known as video remote tellers, the machines offer an ATM-like interface, with the enhancement of a video screen that allows customers to speak directly to a service representative domiciled in a call center. The cost savings arise because, with customer arrivals occurring episodically at branches across the institution’s franchise, a single call center agent can serve multiple machines (similar to how one teller can service multiple drive-in lanes), reducing overall staff requirements.
That noted, ITMs present challenges:
- Perceptually, in terms of customer acceptance of a remote versus in-person channel.
- Financially, due to the sizable implementation cost.
- Operationally, in terms of the implementation and functionality of the machines.
To gain more information about the use of ITMs, Bancography surveyed a group of its clients, and received responses from 61 institutions: 34 banks and 27 credit unions. Despite widespread conversation in the industry about ITMs, only 14 of the responding institutions, or about one-fourth of the respondents, have implemented the technology. However, 60 percent of the remaining respondents cited some level of interest in ITMs, varying from the research phase to concrete plans for implementation in the next year or two.
The study was not weighted by institution type, asset size or geography to yield a representative sample of all U.S. financial providers. As such, readers should interpret the findings below as case studies (or perhaps, an email response focus group) rather than statistically significant data points directly indicative of the industry overall.
For those considering ITMs, cost is always a key consideration, and the respondents using ITMs cited typical machine costs in the $55,000 to $80,000 range, although this does not include one-time infrastructure costs to support an overall ITM program, which can run from $250,000 to $500,000. As noted, the benefit of that cost lies in staff reduction. On average, ITM-using institutions show a ratio of one call center ITM service agent for every 2.4 machines. Almost every respondent using the technology cited an immediate ability to reduce overall staff levels, even net of any add-backs in the call center.
The majority of the responding ITM users have deployed machines in both lobby and drive-in configuration, though a few reserve their use for drive-ins only. The group were evenly divided in terms of whether their ITM deployments allowed branches to function in a cashless environment (where the only cash on site is held in the ITM, and serviced by an external, third-party armored courier service), or whether the ITMs served to supplement traditional teller operations.
The centralized representatives operating the ITMs averaged 3,900 transactions per FTE per month, roughly double the 1,900 average transaction volume of branch-based teller FTEs. This implies a one-for-two substitution rate of call center agents for branch tellers, confirming the rationale for the capital investment of the ITMs. That noted, keep in mind ITM costs include not only the hardware of each machine, but also the aforementioned one-time, institution-level implementation costs and monthly cash-servicing and maintenance costs.
As interesting as the data from the ITM-using institutions are, the reasons other banks have deferred the technology remain interesting, too. Reasons cited included:
- An inability of the current core system to support ITM technology.
- A belief that, given an option of live teller versus ITM, consumers would always choose the former, creating an “all-or-nothing” decision—that is, unless the branch converts to full ITM use with no tellers, adaptation would remain sluggish.
- The need to maintain tellers for commercial deposits that are too large for ITMs to process, leaving little incremental cost to using those same tellers for consumer services.
- Costs, both upfront and operating, that push breakeven to seven to 10 years.
Even among those using ITM technology, some indicated challenges including: coin and currency jams when accepting deposits; unacceptable wait times for maintenance or repair from third-party providers; balancing and reconciliation issues; staff scheduling to accommodate the extended operating hours that are often a key justification for ITMs; excessive wait times between customer inquiry and video-teller response; issues with hardware and software upgrades; and, most importantly, slow customer adoption of the new technology.
Although ITMs are no longer novel, and every banker can point to some institution in their home market using the technology, overall adoption in the industry remains cautious. Even as some institutions are enjoying expense savings from ITMs, others remain reticent to test the technology due to implementation costs or technological hurdles. Still, the sizable proportion of institutions at least researching ITMs suggests the technology will become an increasingly common component in bank delivery networks.
Steve Reider is president of Bancography, based in Birmingham, Alabama. Bancography provides consulting services, software tools, and marketing research to financial institutions. Email: [email protected]