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Self-service moves beyond ATMs in FIs

U.S. FIs are learning - as their European counterparts already have - that automation is the future of banking.

September 14, 2005

How can bankers make their brick-and-mortar branches more efficient? That's a question some financial institutions are finally starting to answer.

Branch automation: FIs throughout the world are moving toward it, according to self-service experts like Uwe Krause, global management and marketing director for Paderborn, Germany-based Wincor Nixdorf International.

It's all about building your business without increasing your operational expenses. That means taking the tellers you have and using them to cross-sell customers and members while you let ATMs and transactional kiosks, also known as minibanks, handle the rest.

"As the branch is restructured, there is a trend to make the cost center into a profit center," Krause said. "In the past, most of the branches offered services like cash withdrawal, but they didn't offer services that the bank could profit from."

But that's changing

Over the next decade, ATM advanced functionality is expected to gain popularity at U.S. financial institutions, according to Tony Hayes, vice president of Dove Consulting's Financial Services practice.

"The (ATM) device will become much more intelligent in the near future," Hayes said. "When you walk into a branch now, the teller recognizes you and knows you always get your money in tens, for instance. The ATMs in the future will be just as personal as a human."

In fact, by the close of 2005, Hayes said, the market will "boom" with ATMs that offer more "personalized" service and convenience.

Saul Caprio, director of marketing and business development for Wincor, agreed.

Caprio said the United States' acceptance of more ATM options is evidenced by the growing number of advanced-functionality pilot programs at some of the nation's largest banks, such as Wells Fargo.

Cash recycling is one additional ATM function that is taking off. Banks and credit unions spend a lot of money processing checks and handling cash; and neither process is handled very efficiently because of human error and limited employee time.

Gunnar Enroth, strategic development director for Swedish ATM manufacturer Banquit, said FIs typically bear approximately 40 percent of cash-handling expenses, which include the production of currency, distribution, storage and interest.

Cutting FIs' costs through automation

One way of reducing those costs is by automating the cash-handling process as much as possible, including automated cash handling at ATMs.

Check 21 is expected to remedy the problem FIs face when it comes to check processing, but few U.S. banks and credit unions have implemented ways to deal with their cash-handling processes.

"When you look at check imaging, almost every significant bank in the country is looking at some sort of piloting program," he said.

Wincor was one of the first manufacturers to produce a self-service recycling system in 1998. About 6,000 of its cash-recycling ProCash 3100 units are installed in more than 20 countries, including Germany, Switzerland and China.

The bank of the 21st century

Today, however, FIs are offering more traditional banking services, such as deposits and withdrawals at machines like Wincor's ProCash 3100xe, frees up their tellers to sell profit-making products, such as mortgages and loans. "This has been very successful with a lot of European banks," Krause said, and he expects the success to be experienced in the United States.

"They are opening new branches (in Europe), they're not closing branches. And they're not reducing the number of people in the branch. The target is to keep the people you have - you just have to change their job descriptions. … For example, you must not fire the cashier. You must train the cashier to do something different."

According to a report published by Boston-based Celent Communications LLC in May 2005 entitled, "Branch Automation Solutions: The Convergence of Teller, Platform, and CRM," small to large U.S. FIs will be the first to jump on the bank-automation band wagon. The branch automation space falls on two sides - those with less than $1 billion in assets and those with more than $5 billion.

North Charleston, S.C.-based South Carolina Federal Credit Union is a good example of automation in the U.S. In December 2004, the credit union, with approximately $1 billion in assets, opened its first "technology branch" using Diebold Inc.'s Remote Teller station and Adque Communications Screens.

The screens, displayed in the branch's lobby, consistently give members information about the credit union's products and services. Scott Woods, SCFCU's chief executive, said the screens are a great way to up-sell members.

A new economy

The branch also has three to four fewer employers than SCFCU's traditional branches. Woods said the branch's automation has contributed to savings, but he declined to give any specific figures or percentages.

"It's been tremendously successful," Woods said. "In the first five weeks of operation, we had already exceeded the transaction volumes of our other branches that have been around for years."

One secret SCFCU learned: The credit union opened its technology branch only five miles away from one of its traditional branches, so that its members would have options. Although acceptance was not an issue, Woods said he wanted to give his members choices.

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Diebold Nixdorf

As a global technology leader and innovative services provider, Diebold Nixdorf delivers the solutions that enable financial institutions to improve efficiencies, protect assets and better serve consumers.

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