Branch rationalization plans are more important now than ever. Some banks justify their brick-and-mortar footprint as an acquisition source for new accounts and mortgages. Others think of the branch as a business hub for high transaction commercial and small business customers. A great deal of observation and industry feedback enables me to say with confidence that the one thing the branch is not is relevant to the average retail customer once the account is opened. Among the phenomena driving this “state of branch irrelevancy” are online and mobile capabilities, a cashless society and intelligent ATMs.
Let’s look at the impact of intelligent ATMs and deposit automation on reduced teller and branch activity and the associated strategy implications. For an initial relationship setup, the brick and mortar branch is still where most consumers go to establish new accounts. Subsequently, about the only thing that gets customers into their branches is the occasional need to deposit a check. With the increased adoption of self-fulfillment for online account opening, any additional accounts the consumer requires can be handled without a branch visit. As these consumers turn more and more to debit cards, direct deposit and online banking for customer service, the need for services that a branch can offer is further reduced.
Countless studies show a dramatic decline in check volumes. This decline is primarily a consequence of consumer purchases and payments migrating to debit cards, credit cards and Automated Clearing House (ACH) debits – both scheduled and those resulting from online bill pay. The types of checks consumers are still writing and receiving are one-off transactions, e.g., paybacks from friends and family, rebates and reimbursements. Most of these payment types are also under electronification assault via person-to-person (P2P) and prepaid rebate cards. So why are banks investing hundreds of thousands of dollars in ATM automation? Does it make sense to pour precious capital into a declining transaction type?
The answer is yes if the investment results in lower overall operating costs. When the incremental cost of handling more deposits is effectively zero, then the business case becomes very clear.
Intelligent ATMs, deposit automation and image deposits all refer to the same underlying concept: allow deposits made at the ATM to benefit from straight-through, automated processing. The following are key components of a best practices intelligent ATM solution:
- Check scanner in the ATM
- Cash acceptor/recycler in the ATM
- ATM deposit processing software that handles MICR line recognition; first-line fraud detection (counterfeit bill and check photocopy detection); balancing and receipt printing with images
- Centralized deposit processing software that handles second-line fraud detection (duplicates, unusual deposit size fraud, holds); posting; clearing and reporting
At a high-level, deposit automation enables a customer to make a deposit that may consist of checks and cash without using an envelope, validate and balance the deposit integrity at the time of the transaction, immediately give credit to the customer, and, by leveraging existing Check 21 imaging technology, route the images to the clearing network. The only human intervention will be to empty the receptacle when it is full.
The benefits associated with intelligent ATMs are many. In addition to better customer service that allows an account holder to make deposits 24x7 and gain full access to the deposit amount, the bank will achieve: lower supplies expense by eliminating envelopes; lower fraud losses and research costs due to empty envelope deposits; faster fraud identification since the checks are immediately available for analysis; reduced manual labor retrieving and processing deposits daily; and reduced courier costs at depository ATMs at off-site locations.
Research suggests that transactions at intelligent ATMs increase following deployment. Data from The Cornerstone Report shows that deposits per ATM are 33% higher for banks that have deployed intelligent ATMs. In addition, productivity as measured by the number of deposits per ATM support full-time equivalent (FTE) is 160% higher for those that have intelligent ATMs versus those that handle ATM deposits centrally.
Deposit automation at the ATM is a win-win technology. Although we wish it had arrived 10 years ago, it is quickly becoming a required component of an overall remote delivery strategy. As financial institutions continue to provide more self-service and remote delivery capabilities, the need for traditional branch services diminishes.
Fully leveraging the investment in these new channels requires that banks gently steer customers away from the branch for the services that are more efficiently handled elsewhere. As more customers listen to this message and choose faceless interaction, the marketing, call center and technology teams will need to work in tandem to deliver and fulfill timely and relevant solicitations, service and support.
Mr. Croal is senior director for Cornerstone Advisors, a Scottsdale, Ariz., based consulting firm specializing in bank management, strategy and technology advisory services. He can be reached at firstname.lastname@example.org.
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