The Shrinking Bank Branch
ATMs and branches are starting to look a lot alike. Not literally, of course - it's still easy to tell a self-service cash dispenser from a storefront. But banks of all sizes are busy turning self-service machines into tellers, while turning teller stations into ATMs.
New technology projects, such as Wells Fargo's electronic pads at teller stations, Dollar Bank's use of ATM video to put customers in touch with actual tellers and Bank of Montreal's leveraging of videoconferencing to bring financial experts to remote locations, highlight innovation that banks are using to win the battle of the bulk.
Even four years after the financial crisis first hit, banks face a problem of bloated overhead that, as the consultant Michael Nuciforo opined in March's issue of Bank Technology News, adversely affects their ability to innovate in other areas. Making branches and automated teller machines work faster by bringing more personal service to ATMs and more digital service to teller windows is a primary way in which banks are reimagining the concept of the store for a new age - one in which branches frankly are smaller and employ fewer people on-site. Branches are embracing technology-enabled agility, lean physical resources and customers who are more comfortable with digital banking than ever before because of their experiences with mobile and the Web.
"There's a tipping point as a result of the regulatory and broader economic issues of the past few years that have banks rethinking the cost and effectiveness of maintaining branches," says Bob Meara, a senior analyst at Celent.
One of the larger branch networks in the U.S. belongs to Wells Fargo, which has more than 6,000 stores and 12,000 ATMs across the country. The bank is doing a number of things to marry self-service channels such as ATMs and remote access via mobile banking applications to the branches. One initiative has enabled the actual teller stations in the branches to take on the appearance of an ATM session.
The bank is outfitting branches with touch-screen PIN pads that allow the customer to execute transactions such as deposits and withdrawals as if they were at an ATM while standing before a human teller. While that's happening, the rep signs up customers for new accounts or performs more complex interactions.
The strategy is to bring at least some automation to all consumers, even those who prefer to do all of their banking in person at the branch. "More than half of our ATM transactions are from 'teller preferred' customers [those who like to engage with tellers primarily]. So with that in mind, we built an ATM-like interface for the teller window. If you want to do a withdrawal, you enter that amount into the pad and the teller dispenses the cash to you," says Jonathan Velline, executive vice president of ATM banking and store strategy for Wells Fargo.
The bank is also using ATMs to help execute a broader channel diversification strategy. For example, it's tying mobile banking closely to cash machines. Customers who are authenticated at an ATM can enter their cellphone number to sign up for mobile banking. A personal financial management interface has also been linked to the ATM. "You can see how much you withdraw in a month," Velline says. ATM activity can be tracked by consumers as part of budgeting goals, with the goals represented by a thermometer - the "temperature" moves up and down to monitor progress.
Apart from some partnerships with hardware manufacturers, Wells develops most of the underlying technology for self-service and branch automation internally and links varied channels and touch points to its customer relationship management and core banking system, which allows for cross-channel pollination: mobile, ATM, Web and personal service are all drawing information and executing transactions from the same core processing software.
Marc DeCastro, a research director at IDC Financial Insights, says the drive to reduce costs and manage declining foot traffic at branches will spark a broad change in how expanded automated self-service capabilities can be used to optimize branches as a financial services venue.
"How the branch is perceived and how it will be built out in the future is changing. There is a movement to go with much smaller branches, perhaps having very small self-service branches tied to a more centralized full-service branch" he says. "So you have a local branch with no tellers where everything is automated, but if you want to do something more complex you'll have to travel to another branch a few miles away."
The analysts and tech providers Bank Technology News spoke with place the cost of running a branch network at about two-thirds of a bank's overall facilities budget, when the expense of employees, maintenance, equipment and size and location of the actual buildings are factored in. A new branch network dominated by smaller buildings, digital self-service, video tellers and less local staff would undoubtedly save money.
Existing remote access technology that's not necessarily cutting edge, such as video tellers and telepresence, is getting a second, more serious look as a remote customer service enabler.
"Banks have to look into this," says Nigel Smith, managing director of Accenture Banking Distribution and Marketing Services in North America. "The technology solutions have been around for some time. NCR introduced its video teller a while ago. But closing the profit gap is about distribution of service. Most of the larger banks that I'm working with have come to realize they have to adopt multiple branch formats that are sized to their local markets."
Velline says Wells Fargo has used the Wachovia acquisition - and the mix of consolidations, relocations and branch redesigns that followed - to develop ideas in branch design and use of space. In some cases, teller stations were relocated or reduced, and more self-service venues were added with the idea of optimizing the physical space in the branch - making it possible to provide the same amount of service in a smaller footprint. "We saw opportunities to use as much square footage as possible for banker and teller support," he says.
Long used by institutions such as Bank of America as a way to cut down on travel for internal staff meetings, videoconferencing more recently is being used by banks such as BMO to bring experts to smaller branches or remote locations. Institutions like Mid-Hudson Valley Credit Union in New York State are using video-equipped ATMs - in this case, a product from uGenius - to broadcast actual tellers in a central location.
More recently, Dollar Bank, of Pittsburgh, began using video tellers. The bank is testing NCR-produced video tellers at ATMs inside branches, providing links to centralized tellers who perform transactions on screen, saving the consumer a trip inside the branch to wait for a local teller. The video tellers are intended to improve customer experience at busy branches.
"We have to learn how this video experience will be viewed as equal or better than what they receive in the branch. The video teller will be able to complete the majority of tasks a branch teller provides, plus many of the responsibilities a platform representative typically takes care of," says Joe Smith, an executive vice president at Dollar Bank. "This will include scheduling appointments with bank representatives and taking applications for credit services."
"Currently, personnel visit the senior facility for several hours two to three times a week," Smith says. "Now we will have the video teller there for all our hours of operation seven days a week. Should a customer need to meet a bank representative, the video teller can schedule it."
The deployment raises the possibility of even smaller branches. "There are many other nonbranch location possibilities. We are optimistic our testing this year of the concept will be successful and we'll be able to use it more broadly," Smith says.
Five Trends That Are Changing Branches and ATMs
BTN polled bankers, analysts and tech providers who spotted five issues that banks must navigate successfully to pull off a renovation of branch and self-service
1. More Video
Rahul Kapur, a principal in the banking and payments group at Cap Gemini, says a proliferation of text and visual media applications, inside and outside of finance, has resulted in greater use of video. Consumer comfort with face-to-face video conversations in venues such as Skype aids adoption of video teller stations and remote access to centrally located loan officers or advisors.
2. Agile Tellers
More self-service means a change in how tellers are used - how many are needed at a given time given the changes in how consumers are engaging with in-branch tellers. That should draw attention to scheduling tools from companies such as Financial Management Solutions that forecast teller staffing based on estimated transaction volumes. The technology, which competes with similar software from Atlas Business Solutions, uses business intelligence to analyze transaction data that's collected and hosted in the tech company's database. It produces reports each month on transaction workloads, labor cost per transaction and salary and benefit expenses matched against transactions; these reports are updated hourly and coupled with projections.
Accenture's Nigel Smith says training will also be involved, given the expanded use of video. "You'll want to determine which people have the skills to transact with a specific consumer, and to handle different transactions," Smith says.
3. Souped-Up ATMs
ATMs are being upgraded to include transactions commonly found on other channels, such as equities trading. For example, most of the major Canadian banks have started integrating wealth management and investment with ATMs, allowing consumers to submit trade orders on ATMs. "If you can offer transactions at more locations, it expands your ability to serve consumers," Kapur says.
4. Branch Makeovers
As branches are redesigned around self-service, there are issues to navigate regarding both hardware deployment and extent of automation. Along with strategies such as "hub and spoke," in which a larger, more fully staffed branch is surrounded by smaller branches with less staff, comes corresponding challenges tied to customer flow and wait times. IDC Financial Insights' DeCastro says careful study of transaction times is necessary before the number of kiosks or screens is set. "Banks have to be careful if they have a single unit in a branch and put too many features on it," he says.
5. Cross-Channel Data Mining
ATMs are increasingly being linked to mobile and Web apps. One challenge posed by this cross-channel migration is the need to ensure data consistency through integration or links to customer relationship management or core banking. At many banks, an expansion in self-service will also require improvement in data management. "There's still not a lot of integration at banks that allows people to pick up a session in one channel where they left off in another," Kapur says.