Facing Virtual Teller Realities
This may be old news to some, but branch teller metrics keep falling as consumers continue to embrace self-service channels. According to Financial Management Solutions, Inc.’s (FMSI) 2013 Teller Line Study, average monthly branch teller transaction volume has declined by 45.3 percent since 1992, while teller salaries and benefits have increased by 84.2 percent over that same time period. Correspondingly, there has been a 123.6 percent increase in labor cost per transaction. It then comes as no surprise that with such a diminishing branch traffic trend, financial institutions have been looking to become leaner in order to improve their operational efficiencies while concurrently facing narrower earnings margins.
While some institutions have reduced their branch footprint, others have fostered an alternative form of branch delivery that employs video technology. Specifically, these firms have replaced their tellers with “personal teller machines.” Such machines function as ATMs and are equipped with video screens that allow customers to contact a teller in a centralized call-center environment for assistance if needed. The machines offer handsets, chat features and signature pads to provide secure and private communications between a customer and the remote teller. Several institutions have even gone farther by offering so called “smart offices,” which allows customers to interact via video conferencing with other banking specialists (investment, mortgage, and other consumer lending officers) for more in-depth questions or concerns. These video banking advocates assert that the technology is a money-saver for them because they are able to open and/or operate smaller branches with fewer employees. These institutions also contend that the technology makes them more accessible to customers by allowing their customers an extended avenue to their services. Ultimately, these pioneers view these new branches as a transitional stage to a time when customers will predominantly communicate/interact with their financial institutions via smartphone or tablet.
It is too early in the game to suggest how long it will take consumers to become enamored of, or at least inured to, this new form of branch delivery, if they do at all. Raddon’s national consumer research details that only 25 percent of all consumer households are receptive to use a branch with video screen tellers if it was convenient for them. Further, only one-fifth would use a branch with video screen specialist branch if it was convenient for them.
Source: Raddon Finacial Group, National Consumer Research - Spring 2013
In fact, the research clearly delineates that most consumers, particularly older ones, still display a preference for “in-person” interactions with their financial services providers. For younger households that are known to have gravitated to other self-service/electric channels, they also still place value on traditional branch delivery. Thus, they are using self-service/electronic channels in addition to, rather than in lieu of traditional branch delivery. Such research findings suggest that at least in the near future, branches that provide “face-to-face” interventions with a “human touch” remain too psychologically important to consumers for them to become obsolete.
The benefit of branch video teller delivery is quite clear in that it provides a bridge between technology and transactions while integrating the remote experience with the branch experience. Further, one video teller housed in centrally-located facility can handle two customers simultaneously. However, video banking delivery is not an inexpensive proposition. One video teller machine can cost up to $85,000 and an added investment in high-performance fiber optic telephone lines (T1 lines) for those branches that serve customers in rural areas. There are also the costs incurred with integrating call-center technology and furnishing it with a capable staff as well as having concierge servicers to man branches in order to guide customers on video-machine use and to be present to handle the customer’s needs if a machine(s) goes down. Given such costs, some institutions that have vetted the delivery channel have found that such a retrofitting could be double the cost of operating a traditional, brick-and-mortar facility. Correspondingly, firms may not expect to see a significant cost savings until after the seven-year amortization period of the equipment they acquire, which then may be obsolete given the emerging technologies of the day.
Although financial institutions may feel a need to keep up with technology or be perceived as laggards, no financial institution wants to put its customer base at risk. As a result, institutions should be reminded that the demographic composition of their customer base will dictate their delivery strategies. Make sure that you know your existing customers and the prospects that you want to attract. Such knowledge will be invaluable to you and will help guide your delivery channel choices and sustain your business model.