Article

Breaking the bank of the cash habit

September 15, 2004 by Sherry Yang

Few things seem as counterintuitive as a bank that does not give cash to customers at its branches.

Yet the policy works well for California-based Honda Federal Credit Union, which cites big savings on cash handling costs and improved customer service.

Branches are not entirely cashless, of course. Customers can make deposits - but tellers do not dispense cash to them in return.

Honda FCU has been cashless since it first introduced checking accounts to members in 1986, said Jim Updike, president of the $370 million credit union. Today, some 76 percent of its 46,000 members have such accounts.

Clean slate

Because Honda FCU was not burdened with legacy policies and procedures, Updike said, it was not difficult to ask members to visit ATMs rather than branches for their cash needs.

Interestingly, several large banks in the United States and elsewhere are now piloting programs in which customers entering branches for simple transactions - including cash withdrawals - are directed by a concierge to ATMs rather than to teller lines.

ATM impact

Free access to lots of ATMs is a key to making Honda FCU's policy work, Updike said.

Honda FCU supplements its 32 ATMs in four states - many of them located at Honda plants where members work - with ATMs in the CO-Op Network and Alliance One, both of which offer surcharge-free ATMs to cardholders of their member institutions. CO-Op Network has 19,000 ATMs in the United States and Canada, and Alliance One has 3,200 ATMs in 38 states.

The credit union works to make its machines as accessible as possible to members, Updike said. Members who forget ATM cards are issued temporary ones on the spot. They are also usually allowed to override daily withdrawal limits if they need extra cash, a policy that became easier to implement when Honda FCU recently began driving its own ATMs via aMosaic Softwareswitch.

Because Honda FCU is a single-sponsor credit union, with membership open only to Honda employees and their family members, the institution is liberal when it comes to placing holds on members' funds, Updike said. "When they make a deposit at the ATM, they can immediately withdraw those funds."

Not surprisingly, volumes are high - 250,000 total monthly transactions - at the 32 Honda FCU ATMs.

Staying in contact

Updike believes the cashless policy helps Honda FCU offer better interaction with its members, using fewer branch employees.

It receives high marks from mystery shoppers who visit branches every quarter, Updike said.

Updike has some concerns that Honda FCU may miss opportunities for cross-selling products like loans and CDs to its members because they visit the branches infrequently.

However, the credit union plans to counteract that impact by linking its member database and ATMs and presenting targeting marketing offers to its members at machines, a process Updike said will be facilitated by the Mosaic Software switch.