"The way customers want to interact with us is changing," says Kevin Sullivan, managing director for distribution strategy at Fifth Third Bank. "Customers are wanting to bank with us where, when and how they want to" — increasingly, through digital outlets. This trend has prompted the bank to set up test branches for piloting new technology to appeal to changing needs.
The Ohio bank — like financial institutions nationwide — has observed transactions migrating to self-service channels from its teller lines. "There has been an annual decline in teller transactions," says Sullivan, estimating the typical decline in the 4% to 5% range for Fifth Third. "With the rise of digital channels, that rate of decline [in 2013] has almost doubled."
The bank has been testing more advanced ATM software and has removed teller counters from some branches in recent months.
"Make no mistake. The branch is and will be for the foreseeable future [important]," Sullivan says. "It's just a multi-channel environment now."
In 2013, Fifth Third piloted 10 so-called Express branches that included refreshed interior designs. "The most striking thing is the absence of a teller line," Sullivan says. "The first time a customer walks in can be a little befuddling. But it doesn't take more than a few seconds for someone to walk up and explain."
He expects to double the number of Express branches Fifth Third runs and introduce a few dozen advanced ATMs at its brick-and-mortar locations by yearend.
"Grocery stores and the airport counter paved the way for us," Sullivan says. "There's comfort with self-service in an assisted environment."
The bank is working with several vendors, including NCR and Diebold, to introduce so-called smart ATMs that can dispense more denominations, such as $1, for example, and cash a check in one step. These machines also have a sleeker look than the ATMs of yesteryear. "What you [will] interact with looks like a big iPad," he says.
The tests offer the latest example of a bank beefing up its ATMs in a do-it-yourself era. The bigger banks like Chase and Bank of America have also enhanced their ATM software to include more teller-like capabilities -- some of their units even let customers video chat with a mortgage expert or a remote teller streaming to a screen at the drive through station.
The branch investments are part of an ongoing effort to help in-branch employees stay focused on sales and service rather than count dollars and coins.
"So much of the value-added activity is still happening in the branch," Sullivan says. "[Automation] frees sales and service from mundane tasks like managing a cash drawer."
Fifth Third's new smart ATMs, meanwhile, could be placed in front of a teller counter to help the customer expedite a teller transaction or replace the teller counter altogether, Sullivan says. In either scenario, the technology will reduce paper work, which is "a bigger deal from the cash perspective and operating model," Sullivan says. "It gets rid of cash handling; it's all done automatically through the device."
Initially, smaller and more automated branches will be located near one of Fifth Third's larger branches, and will come with more accessible ATMs. "It's all about convenience," Sullivan says. "One element is to provide 24-hour access…. Historically, we have not done this."
Then, Fifth Third is considering loosening some policies and procedures on select self-service machines. For example, it might relax ATM withdrawal limits when the hardware is located in a branch, he says.
Adding automation lets the bank operate with leaner staffs. Yet at the same time, Sullivan credits in-branch employees for the success of newer branch concepts. "What makes the automation work is the employees who educate customers," he says.
Some ideas for the new branches have come from outside the country. Fifth Third draws inspiration from Scandinavia. "Where it's 2014 here, it's probably 2024 there," he says. "It gives you a feel for the art of the possible. We learned a lot from credit unions here."
Branch innovations, however, will come without a one-size-fits-all prescription and are just one piece of the overall banking delivery puzzle that financial institutions are pressured to digitize.
"The truth is we are always thinking in terms of the omni-experience," Sullivan says. "I try my darnedest to not use the word 'ecosystem' but it is the truth. You have to think holistically."