Article
The course for intelligent-deposit ATMs
Jerry Silva talks about the effect Check 21 is having on ATMs.
June 24, 2007 by Tracy Kitten — Editor, AMC
*Editor's Note: To submit a comment about this article, please contact theeditor.
Many of today's retail banks are eager to take advantage of the financial benefits promised by customer self-service banking options, but they aren't confident about putting together business cases that help them envision what is truly financially possible for their organization.
Wincor Nixdorf USArecently sat down with TowerGroup research director Jerry Silva and asked him to share his thoughts about building the business case for one of the retail-banking industry's most exciting new ATM developments, intelligent deposit.
Intelligent deposit, also known as deposit automation, allows customers and members to make "no-envelope" deposits at ATMs.
Silva says that if the end goal is to promote your services through emerging ATM technologies, then you must first achieve alignment on the bank's retail strategy and then let the business case flow from there, making sure you're giving appropriate attention to both the cost and the revenue generating sides of the profitability equation.
WN: What's the single most important thing decision makers need to bear in mind in developing a business case to support the implementation of intelligent-deposit solutions in their ATM channel?
JS: Banking managers and leaders wanting to deploy intelligent-deposit solutions throughout their networks must first and foremost drive the thinking UP into the organization. If I'm running the branch or ATM channel for my bank, I need everyone in the enterprise to think about and buy into how intelligent deposit supports our overall retail banking strategy. There are basically three high-level goals that dominate most U.S. banks retail banking strategies. They are: 1) new customer acquisition, 2) satisfaction and retention, or 3) cost control. Know and be able to tie your business case back to that goal which has the highest priority in your organization.
WN: What are the major selling points for an intelligent-deposit solution?
JS: Intelligent deposit, or deposit automation, gives many banks a competitive advantage over the guys down the street. For instance, an intelligent-deposit solution like envelope-free deposit technology may improve customer satisfaction by enhancing the peace of mind and confidence customers feel when making a deposit at your bank's ATM. Once customers embrace the new process and overcome their fears of being "stuck in the envelope" your bank might see customer deposits increase and retention improve.
WN: So, let's talk about the business case for intelligent deposit. Let's start with the cost side of the equation. What costs should retail bankers keep front and center when they develop their business cases?
JS: Primarily, the costs fall into two areas: technology and human resources. Let's take technology first. In creating the business case, technology cost considerations should encompass the initial cost of the products themselves, implementation costs, long-term support and maintenance as well as the costs associated with integration with existing banking and back office software. Also, it's essential that buyers are honest with themselves up front about what kind of ROI threshold they have for the machines themselves. On the human resources side, it's important to be cognizant of the potential costs associated with re-deploying staff formerly involved in manually processing ATM deposits both at the branch and the central proofing site.
WN: What are the potential cost savings to consider?
The battle for customers Among many leading U.S. FIs, self-service banking alternatives, such as ATM, Internet and IVR services, are becoming increasingly popular in the daily battle for consumer attention. At the same time, regulatory developments, like the Check Clearing for the 21st Century Act (Check 21), have spurred a host of technology advancements in bank productivity through the streamlining of back-office processes, a reduction in fraud and a decrease in some baseline hard costs associated with ATM operation. With checks remaining the largest non-cash payment option in the United States, check imaging has become one of the fastest-growing areas in retail banking. It's estimated that U.S. banks image more than 10 million checks every day, and that number is growing exponentially. Customer needs, competition and regulations are important catalysts for the evolution of branch strategies and the adoption of electronic-check processing. In response, banking -echnology vendors are introducing new deposit technologies that further automate and accelerate ATM deposits, such as bulk-check and cash-deposit modules. |
JS: Deposit automation can bring down many of the bank's costs. Specifically, in the case of bulk scanning technologies, banks may see cost reductions associated with reducing fraud. These technologies help reduce fraud in two ways. First, they eliminate "empty envelope fraud" from day one. Second, they may make criminals more hesitant to present a fraudulent check. While this second aspect may be harder to quantify, many industry experts claim that this fraud reduction effect financial impact in degrees too high to ignore. After fraud reduction, there are the additional cost savings expressed in the form of reduced supply costs. If you add to this equation a cash recycling solution - a device that accepts and stores dollar bills for dispensing at a later time - banks can realize further savings through reduction of employee interventions and armored carrier events while improving cash float.
WN: The potential cost savings are really compelling. But we know that retail bankers are also excited about deposit automation because of how it can grow their business.
JS: Deposit-automation solutions can help banks generate more revenue in a couple ways. The first revenue growth area is new customer acquisition, and this is basically all marketing. It's marketing because there's really no direct link between the technology and customer acquisition. Here's what I mean: Wells Fargo has excelled at turning their deposit-automation solution into a competitive advantage for them - but it's all in the positioning of the solution in the marketplace as something that makes them appear innovative and customer-focused and as an organization that continues to bring exciting, relevant new services to their customers. I can't stress the marketing aspect of this enough. It may seem trivial, but you can certainly point to Wells Fargo's success as a result of their effective marketing of the services.
The second revenue growth area is within customer satisfaction and retention; however, these growth opportunities may come at an initial cost. What I mean by that is that one of the costs involved in the deployment of deposit-automation solutions is the cost of re-educating customers to use your machines differently. Most customers have been trained to use the ATM in a certain way. When you go changing it on them, customers may not readily relate to the potential shortening of their ATM visits, but they most certainly will become frustrated trying to learn a new process. This is a temporary issue; customers do learn how to use automation. Eventually, customers will get over the changes and learn it whether you train them or not. However, from a customer satisfaction and retention standpoint, I recommend to all banks deploying new deposit technologies that they use very clear signage at the ATM, or even position someone within the branch as a "concierge" who helps them learn these new processes. Once customers get over the initial learning curve, they will begin to see the advantages of these new processes driving increased satisfaction and deposits. Finally, larger banks with heterogeneous ATM networks need to remember that different ergonomics offered by the various manufacturers may confuse and bewilder customers as they move from machine to machine within their networks. Banks need to always keep this in mind, especially as they consider deposit-automation solutions from various vendors offering differing features such as single check or multiple check scanning capabilities.
WN: What are some of the "traps" that retail banking decision makers need to run in building the business case?
JS: The major thing that comes to mind is risk and policy management. These can be real "gotchas," if buyers don't consider them during the business case phase. Within the risk and policy management areas it mainly comes down to exception management. Bankers considering these new technologies need to have processes and policies in place to address regularities, such as the exceptions in which ATM check scanning equipment scans a check upon which the currency and legal amount do not match or it scans a check for which the MICR code can't be read. What happens when something is wrong? Do you or don't you process the deposits?
What banks might want to do is look at their current check processing and determine whether they have ever separated their ATM deposits from their branch deposits, and then track and analyze how many of each kind of exception they have processed. Then, they should estimate the increase in deposits coming into the bank via deposit automation and extrapolate to get a real feel for both the numbers and types of exceptions. From there, banks can evaluate their risk management policies and anticipate how they will treat the customer with regard to these exceptions.
WN: Anything else we haven't asked that you think is important for us to know?
JS: When you consider new customer self-service technologies, you need to examine: to what extent is my bank an innovator? If you look at someone like Citibank, they are an innovator. Wells Fargo and Bank of America are also innovators, and they market the heck out of their technology innovation and the benefits it brings to customers. US Bank, on the other hand, is making great strides in deploying new technologies, but they are not actively marketing them. As I said earlier, banks reap many of the benefits of deposit automation when they market it effectively to their customers.
My advice is that banks should closely examine how deposit automation falls in line with their overall corporate and brand strategies to understand how to accurately position and execute their marketing. Finally, as a last thought, I want to mention that migrating your customers to the ATM means that you lose essential face time. Always, always, remember that one of the dangers of being successful in automated channels is that you wind up spending less time with your customers, making it harder to sell them more services. Banks looking to enhance their self-service channels might want to consider re-engaging customers through personalization and targeted marketing to help address that challenge.
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