SRM recently reached out to several dozen credit union clients to better understand their priorities for the next 12 months, including new product rollouts to address areas of greatest interest to members. Their responses cover a wide area, which isn’t surprising given the unique client segments being served. Nonetheless, certain trends clearly emerge.
Along with the longstanding interest in mobile banking solutions, the most common initiative identified by our clients involves the rollout of Interactive Teller Machines (ITMs), also known as Virtual Teller Machines, or e-Tellers. Interestingly, it is the steady growth in online banking and the rapid growth of mobile banking that is responsible for the growing interest in ITMs. Though branch traffic continues to diminish, the question is not will there be branches in the future but rather how will branches evolve to serve the needs of consumers that are increasingly digital first in all aspects of their lives.
The new generation of ITMs offers intriguing functionality, including video chat and mobile-device interaction. Some have user interfaces that approximate the interfaces of digital devices. A member can conduct many transactions that would typically be handled in the branch on the ITM and should they need help, the video capability connects them to a person instantly providing visual and verbal communication.
It is probably no surprise ITMs carry a hefty price tags ranging from $60,000-$90,000, roughly double that of a standard ATM. Even if a financial institution only pilots ITM, this still usually means committing to a few dozen units to deploy over 10-12 sites. Those numbers add up fast. In addition, consumer adoption of ITMs has been limited to date.
Adopt Early or Wait and See?
We see two clear schools of thought in the marketplace, with credit unions split evenly between the two. Half are actively engaged in ITM projects or are seriously considering them. The other half are either waiting for further market data to support the investment, or have decided, in the words of one credit union executive, “We don’t want a machine between us and our members.” Interest in ITMs does not seem to be geographically concentrated but they are more prevalent in large metropolitan areas and more frequently found at medium-to-large sized institutions.
Rarely are ITMs viewed as a vehicle to replace branches or slash full-time equivalents (FTEs); more often the plan is to maintain the current headcount or make slight reductions while enhancing service levels. For example, ITM adoption can allow existing tellers to be redeployed as roving concierges focused on higher value-added member needs. ITMs could also be the future of stand-alone kiosks, boosting service levels across a broader footprint, particularly for small businesses making frequent deposits and cash withdrawals. All three major ITM manufacturers also highlight the lower ongoing servicing costs given the machines’ ability to accept cash deposits, which enables cash recycling and reduces the frequency of visits to replenish.
How Much Hand Holding is Necessary?
One frequently heard objection to this model is, “Why on earth would someone drive to a branch just to interact with a machine?” Consumer behavior is not always just about the most logical conclusion and real-world evidence indicates that humans do indeed show up at branches just to use a machine (consider the ATMs at most branches). Of course, the trick is in segmenting your base to identify which customers value a human touch versus the convenience of digital self-service and under what circumstances.SRM’s role is not to determine which ITM strategy best fits your institution. There are sound reasons to support any of these approaches, depending on the individual situation and the credit union’s aspirations. If you decide to deploy ITMs, however, SRM has demonstrated the ability to negotiate meaningful vendor contract savings. Given that ITMs are likely to be seven-figure investments, such assistance should be most welcome.