Banks pondering whether to install video teller machines — ATM-like kiosks that connect remote tellers or financial specialists with customers — can learn a lot from the experience of Ion Bank.
The Connecticut community bank, formerly Naugatuck Savings Bank, began investing in video tellers in 2012 to keep pace with larger rivals.
"We compete with banks like TD Bank that have a 7-to-7 strategy with their branches being open," said Dawn Orsini, Ion's vice president of retail banking.
To fight back affordably, Ion borrowed an idea that a growing number of financial institutions have been testing: letting customers chat by video with offsite tellers. The bank purchased two interactive teller machines from NCR Corp. and placed them into a branch to extend its hours.
"The driver for us was convenience," Orsini said.
Nineteen months later, the $1 billion-asset bank calls its experiment a success. It has been able to expand its branch schedule by 27 hours per week, and customers have taken to using the machines to deposit paychecks and withdraw cash. On average, 40% of transactions go through the personal teller machines.
Ion recently installed four more machines at two other locations and is in conversations to add more. The bank has 19 branches.
The purchases are viewed as a long-term investment that will cut expenses, strengthen customer retention rates and produce more account and other sales.
Its experience resembles that of other banks that have made similar moves: branch traffic diminishes, but does not vanish.
"People continue to visit the branch," said Genie Driskill, the chief operating officer and senior vice president of research at Synergistics Research Corp.
So banks, which are challenged to continually spruce up all of their customer-service points, are refining their branch models to give consumers what they want without draining their budgets.
And video is one of many things banks are testing, said Doug Johnson, vice president for risk management policy at the American Bankers Association.
"It's an efficiency," Johnson said.
If you're wondering why a person would head into the branch to then speak with a video teller, keep this in mind: research shows that branch visitors still want quick service. So if the machine is free and the live teller is not, there is a motivation to use assisted self-service.
"What we are finding is customers who come in through the doors may use personal teller machines if a teller isn't readily available," Orsini said.
A lot of credit goes to the video tellers who are savvy at cultivating relationships, even at a distance, Orsini said.
"That's what really bridges the gap," she said. "[People] develop a relationship with a person on video like they develop a relationship with a teller in person. …You forget it's video. It feels like the person is right there with you."
Sometimes, branch visitors even ask where the video tellers are on their days off, she said.
Banks have to work hard to find tellers who are naturals in front of the camera. Earlier this year Ion updated its interview process to include video tests of job candidates.
"We have some people who are really good in face-to-face conversations, but it doesn't always translate to video," Orsini said.
Ion is one of a growing list of banks that are using video technology to keep their branches open longer on a leaner budget.
Some banks have faced internal resistance. Bank of America, which makes tellers available on its so-called Teller Assist video machines, was the object of protests by tellers who felt the machines threatened their jobs.
Orsini describes the technology as one more option for consumers.
"It's really about a choice. We have tellers in branches and will continue to," she said. "If a customer wants to come in during branch hours and see a person, it's an option. We live in a 24/7 world where there is certainly an expectation of accessibility to banking products and services."