Carol Wolf Sep 14, 2016

Goodbye vacuum tube, hello data tube

It has been a common banking practice across the U.S. and Canada for decades; customers conduct transactions from their cars outside of brick and mortar branches via a clear plastic cylinder sucked from auto to teller via a vacuum tube.

But while this low- tech method of banking is customer friendly, it requires one or more tellers to be physically present at branches that have become increasingly less frequented as customer transactions migrate online. The cost associated with keeping the lights on at these little used locations increases expenses system wide and adds scheduling complexity to accommodate teller vacation and sick days.

Enter the next-generation of drive-up tellers, where video technology is replacing the vacuum tube. Banks, particularly in rural communities, are turning to teams of tellers at centralized locations who can speak to customers via video conferencing devices in the drive-up lanes. This method reduces system costs at branches while increasing available drive-through hours and maintaining personalized service.

Centralized Tellers

Most drive up, video teller machines look much like ordinary ATMs, but customers can make deposits, withdrawals, transfer money, and make loan payments in real-time with face-to-face conversations. The only difference is that the teller can be located across town or in another state rather than across the parking lot.

“We’ve replaced the vacuum tube with the data tube,” says James Johnson, CEO and president at PCSB, a family-owned community bank based in Clarinda, Iowa. “Our centralized group of tellers reduces overhead but remains a digital extension of our people. That way, we can maintain the very personal, relationship-driven style of banking that
our customers value so much.”

Rather than abandoning more rural branches as business slowed, PCSB added so-called Interactive Teller Machines (ITMs), Johnson says. PCSB has nine drive-up ITM lanes at five branches in Clarinda , Lenox, Creston, Corning and Mt. Ayr. Some of these branches have three ITM lanes plus ATM lanes, he says. “Other banks are closing up and leaving town,” Johnson says. “We are taking their place so that we are in a growth phase and are hiring staff.”

When tellers were located at each bank, a teller had to be dispatched to the affected branch if someone was sick or on vacation, Johnson says. 

Now, PSCB has multiple, overlapping shifts at one location, which tends to eliminate complex scheduling changes. PSCB has also cross- trained telephone customer service representatives as video tellers and all of these employees are housed in one location, he says.

The ITMs are open 7 a.m. to 7 p.m. five days a week and, because of the centralized staff, Saturday hours have been added. Before deploying the ITMs, PCSB’s heaviest transaction volume occurred between 11 a.m. amd 1 p.m., and again from 3 p.m. to 5 p.m. That’s begun to level out throughout the entire 7 a.m. to 7 p.m. time period as consumers realize they have more time to bank, Johnson says. “So, the video tellers are causing consumers to shift their behavior. Customers can now do their banking on their terms and on their time frame and they love having that option.”

Raleigh, N.C.-based Coastal Federal Credit Union has replaced four vacuum tube locations with video tellers and has plans to convert four more, says Willard Ross, the organization’s chief strategist and talent officer. Video tellers are available from 7 a.m. to 7 p.m., seven days a week, and customers are very happy with the extended hours and personalized service, he says.

In most cases, Coastal Federal has kept the branch buildings open to use for more high function transactions such as loans, Ross adds. The move to video tellers has been a key strategy in Coastal Federal’s branch transformation efforts. “There is a different skill set between the type of manager needed to manage tellers and the manager who
deals with more complex accounts,” he says. “That’s part of the magic of video tellers in branch transformation. Those employees inside the building can now concentrate more on the complex products.”

Managers can now run three branches instead of just one, and sales per-person inside the branch has doubled, Ross says. In-branch marketing teams now average three sales per person, per day. They had about 1.5 sales per person before video tellers, he says. “We now have half the branch managers and twice the sales. And we have 40% fewer tellers with an 86% increase in hours.”

Video teller machines cost about the same as an ATM, according to Ross. And even with depreciation and maintenance costs, Coastal Federal has benefitted because of the increase in sales through new loans and accounts, he says. Members aren’t charged for video teller services. 

Coastal Federal’s next machine purchases will be for devices that can act both as ATMs and video tellers, he says. Currently, the vacuum tube replacement machines are video-only. A dual function machine would better utilize the equipment, Ross says. After hours, non-members would pay for ATM use. “These dual machines are important for us to increase revenue,” he says.

Paul Dilda, head of North American branch and ATM channels at Montreal, Canada-based BMO Financial Group, says his organization plans to replace some vacuum tube drive-up locations with video tellers but is taking the process at a slower pace. BMO is using video teller technology inside one branch in Chicago as a way to gauge customer
reaction before making more aggressive moves, such as replacing drive-up locations, he says.

“The reaction by customers has been mixed,” Dilda says. “Some customers get it, while others are more reticent. We want to spend more time on customer education.”

Other banks replacing vacuum tubes with video tellers include the Midland, Tex.-based FirstCapital Bank of Texas, which has opened 24- hour, drive up video tellers, five days at week, at locations in Amarillo, Lubbock and Midland. The bank has plans to extend those hours to seven days a week in the near future.

Birmingham, Ala.-based BBVA Compass is using drive up video tellers at locations in Houston, Pearland and Humble, Texas, as well as Birmingham. These “Banker Link” locations are open 24- hours a day, seven days a week. Bank of America, based in Charlotte, N.C., is testing videoenabled ATMs at a few drive-up locations and offers both English and Spanish-speaking tellers. And Dollar Bank has opened two drive-up video teller locations in the Pittsburgh area, where it is headquartered.

Ms. Wolf is a contributing writer to BAI Banking Strategies based in Chapel Hill, N.C.

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