With the banking industry’s aging ATM infrastructure and desire to woo digital customers, interactive teller machines (ITMs) stand to be an important component of a financial institution’s competitive strategy. But are they worth the investment?
ITMs present numerous benefits to customers and FIs alike. For customers, they provide superior benefits versus ATMs or drive-thru tellers:
More personal service. These days, banking is about accessibility and seamless transactions, and ITMs provide the perfect blend of technology and service. At the touch of a screen, a smiling rep appears to assist the customer, answer any questions or validate a transaction.
Ability to conduct any teller transaction. When a person can speak with a human following a transaction, customer satisfaction increases significantly. And if executed properly, employees can answer questions about mortgage payments, loan status, account balances and more.
Greater convenience. A centralized ITM staff enables a bank to stay open until 6:00 or 7:00 p.m., as well as offer longer weekend hours.
Faster service inside. Even if older customers never use the ITM, the rationale is that service times inside become faster since others are using the ITMs outside, allowing the bank to allocate more resources for branch-centric customers. This can improve overall customer service and retention.
Validation of other digital channels. When the ITM screen presents a consistent feel to the customer’s mobile or online transaction or can serve up a marketing offer based on customer data, it reaffirms the digital experience and encourages the use of other digital channels.
ITMs also present significant savings and growth benefits to financial institutions:
Transactional savings. ITMs yield transactional savings that can offset the increased purchase and operational costs. For example, an in-person teller transaction is approximately $4.50; an ITM transaction is between 50 and 70 cents. Some of this is attributable to the flexible use of staff; representatives are not dedicated to a single window and can serve customers on demand. Plus, ITMs enable FIs to assist customers with any teller transaction, without the investment in lobby space or additional boots on the ground.
Market expansion. Despite the initial investment, ITMs are still cheaper than traditional brick and mortar branches and may present an opportunity for FIs to enter new markets. An ITM can make it possible for a smaller FI to expand its footprint in a rural area (bandwidth permitting) without the overhead costs of opening a branch.
By their very nature, ITMs can help banks and credit unions attract younger customers. Millennials and Gen X appreciate the technology, seeing ITMs as a bridge between walking through the door or settling for a cash-only machine.
Like any business undertaking, there are obstacles to consider. For ITMs, it’s mostly cost, but there are others as well.
Large capital investment. Cost is the largest drawback, in both the initial outlay and maintenance. A gap analysis is a critical first step in helping an FI determine how the capital expenditure fits into its long-range technology plan. Is it better to invest now fully, invest in future-ready devices or delay the investment? Not investing at all is not an option for FIs that expect to survive the next decade.
Ongoing expenses. Beyond the initial capital investment, FIs can expect hardware, software, installation and maintenance expenses as well as costs associated with training contact center staff to operate the machines. Plus, these machines rely on higher bandwidth (ethernet connection with a minimum size of 5Mb) for the video connection and a direct line to the contact center.
Longer transaction times. ITM transactions can take longer than ATM or drive-thru teller transactions. Depending on the service model (ATM, ITM or a combination), interaction with a remote teller may be required for every transaction. However, wait times at ITMs tend to be shorter.
Staff accommodation. With more ITMs, FIs will need to determine how to make staff transitions that could include shifting front-line staff to the contact center or repurposing staff to greeting, platform and other sales roles. The upside is that with new, challenging roles and the opportunity for professional growth, an FI can attract higher quality individuals and realize reduced turnover.
Merely installing an ITM and hoping for the best is an ill-conceived pipe dream. With an aging ATM infrastructure and Microsoft requirements for Windows 10 looming (mandatory by 2023), ATMs will need to be upgraded or replaced in the next three to four years. Now is the time to start thinking strategically about these technology investments.
Conduct a Gap Analysis
According to Cornerstone Advisors research, FIs reported a decrease in planned ITM technology investments between 2017 and 2019. In 2017, 21% of surveyed institutions planned to add or replace ITMs; in 2019 that number dropped to 17%. This trend implies that many FIs are not acknowledging the strategic impact these machines can have on their overall delivery channel initiatives.
Whether it’s replacing or upgrading single or multiple ATMs or ITMs, the first step is to conduct a gap analysis. A gap analysis compares an ATM’s or ITM’s current return on investment, its replacement costs and other ongoing expenses. Too few institutions conduct this critical analysis, which can make the difference between a successful investment of thousands of dollars – or failure.
As a natural evolution of ATM technology, ITMs are meant to support the “Branch of the Future,” and they need to show their value in a slowly shrinking cash-need society. The digital-first population, those who have only known cell phones, computers and ATMs, will continue to age, which should lead to greater ITM adoption rates and flattened costs.
An area’s market expansion opportunities and customer preferences can help banks and credit unions develop their ATM replacement/ITM strategies. A detailed integration plan can help them clarify the future-ready objectives that will yield the desired transactional results.
This post is adopted from “Are interactive teller machines the branch of the future?” which appeared in the April 2019 issue of Texas Banking.