Jun 4, 2019
In this podcast we discuss the utilization of self-service and teller automation technology and the implementation of recycling to drive more efficiency and to improve the overall customer and staff experience.
Scott Anderson: Hello. I am Scott Anderson, senior director of Evangelism, and I'm your host for this episode of COMMERCE NOW. On today's podcast, we welcome Diebold Nixdorf's Jim Flannery, global advisor for Banking Channel Transformation and Tim Hoover, principle product manager for System Solutions. We're together today to spend time talking about how cash automation, and in particular, recycling can have positive impacts on today's branch environment. As we all know, the cost and controls around handling cash is a major factor in branch economics. [00:00:30] Tim and Jim have joined me to discuss the utilization of self service and teller automation technology and the implementation of recycling to drive more efficiency and to improve the overall customer and staff experience. Let's kick this off. Jim, I'd like to start with you. As you spend time with financial institutions of varying size and location, what opportunities do you see to streamline the cash handling processes for both customer and staff journeys?
Jim Flannery: Yeah, so any cash automation is going [00:01:00] to provide tremendous upside for a bank or credit union. Something like teller automation, which has been around for quite a while, we've seen lots of customers see efficiency gains, throughput improvements not only reduce cost but also provide a better experience for the customers, shorter queues, obviously shorter wait time, so those type of things. I think it gets a little more interesting when you start talking about self service recycling.
Jim Flannery: In [00:01:30] the US and in Canada, we'll say it's been a little slow for the banks to adopt that, but we're finally seeing enough cash coming in where the migration of transactions from the teller line to the device, which have traditionally been on the more costly side for the banks to do, it's finally hitting that tipping point where we're seeing an opportunity to attack that CIT cost, that high cost of cash in transit, which has been a sticking point for many FIs that they want to see maybe reduce.
Scott Anderson: [00:02:00] Excellent, thanks very much. I think when we consider what's been happening over the last I'll call it five, ten years, technology has really come a long way in this regard. Tim, perhaps you can share with us your opinions around how recycling ATMs can augment the branch transaction processing.
Tim Hoover: Sure, Scott, and essentially let the technology do the work. There's now, with this technology, the ability for accounting, denominating, bill fitness sorting, counterfeit [00:02:30] detection and all that can be done at high speeds like 10 notes a second through this technology. In addition, this technology is now coming on the fourth, fifth generation of product, and it's very secure, efficient and reliable.
Scott Anderson: Now that we've got technology and Jim, as you've said, there seems to be a little bit of take up hear in the North American space in particular and certainly this has been very prevalent globally, especially if we look at some western European [00:03:00] countries. I think about what traffic we see in the retail branches and some of the segments who place some real heavy demand on branch cash processes, really small and medium business come to mind in this regard. Tim, what advantages do you see with technology such as recycling ATMs compared to how we typically manage the segment over the counter or even with teller automation?
Tim Hoover: Well, Scot, we've seen some surveys, recent surveys that have shown that merchants now are more willing to use this self service [00:03:30] technology for their daily or even weekly withdraw needs. They would expect and they've mentioned that there would be less waiting in lines at the branch during peak hours or Fridays. It would allow for immediate credit for their cash or check deposits and then this technology ... And for merchants, there would even be the possibility even to promote for this SMB customer segment that maybe [00:04:00] the use of technology at 24 by 7 vestibules that are let's say close proximity to their business may be in malls or outlets, those types of places.
Scott Anderson: Interesting, so really would I think probably improve how this small business customer would perceive the financial institution as giving them a little more access to automation to allow them to handle some of those cash deposits on a more frequent basis, so that makes a ton of sense to me. Jim, assuming [00:04:30] we have this opportunity to leverage recycling systems more holistically and to drive more transactions to self service, what positive impacts do you see for staff productivity and even consumer engagement?
Jim Flannery: Yeah, so industry wide, we see roughly 30% of deposits are occurring at a self service channel, so for the most part, consumers have become comfortable with depositing checks either at the ATM or more recently on their mobile device, but [00:05:00] historically, cash has always been somewhat of a sticking point, getting consumers to deposit that cash for whatever reason was always more difficult. I think some of the it goes back to the envelope deposit days of ATMs, where the trust factor of not have a valid count or inventory of what was deposited was something that consumers just wouldn't part with.
Jim Flannery: Now with recycling and having a growing set of consumers that are okay with cash deposits, we're seeing quite a few of those traditionally [00:05:30] cash deposits that were happening at the teller line or through the drive up teller now moving to the ATM. I think that really opens up two interesting points to be made is one, fewer transactions at the teller line allows the banks to be more judicious in how they staff their teller line, so being able to take potentially a small reductions in head count, which will reduce the cost of servicing. But I think the broader point is freeing up more staff time to spend with customers, having conversations, doing [00:06:00] investigative dialogue, where they can uncover potential gaps in products that consumer may be looking for, so really using that time that they're not spending head down, counting cash as a lower value transaction, now becomes an opportunity to cross sell and really have a more productive conversation that can deepen the relationship and hopefully create more satisfied customer.
Scott Anderson: Interesting. Just to play on that, I think one of things we probably need to consider then [00:06:30] in the branches is some good lobby leadership so that the small to medium business customers who are coming in with bulks of cash understand that the self service devices now with larger acceptance and even recycling can support them. Anything you would add to that sort of thought process? How important is it for banks to be thinking about, banks and financial institutions, around lobby leadership and directing these consumers to the right use case?
Jim Flannery: Yeah, I mean clearly you need to understand the needs and the expectations [00:07:00] of the different segments, so in the research that we do, what we find is that generally younger consumers with above average income are kind of target audience for more advanced self service transaction and then as you get into older segments, and to some degree, segments of more modest income, their dependence on the attended teller, primarily the channel that has that extra help is going to exist.
Jim Flannery: Your point on lobby leadership is spot on. Being able to identify [00:07:30] who would be a good candidate for introducing or demonstrating the self service deposit versus some consumers just aren't going to change their behavior and they're going to expect that I guess we'll call it hand holding for even a routine transaction.
Jim Flannery: Now I think it becomes more interesting with the small business segment because traditionally when you look at the lower end of it, it's often the principle of the business that's doing most of the banking and their time is so important because they're running a business [00:08:00] and banking is not something that they enjoy doing. And when you think about recycling and having the ability to perhaps forgo standing in line at a busy time and use that device for despot is pretty intriguing. I think it becomes even more interesting when you start looking at other things that could enhance that, whether it's cardless or one-time use pins where they can send a runner to do the deposit where they'll get some sort of notification where they don't even have to go. They can send somebody else and it can be after hours or it could be during busy [00:08:30] and you won't have that waste of time spent standing in line.
Scott Anderson: That's a great point and I think it's important as the financial institutions think about this for some of those small and medium businesses, getting the message to those business owners, even if they aren't the ones coming into the branch is critical, so it's a marketing this would be important. As I think about some of the things that I've seen globally, I've had the opportunity to witness what I'd call cashless branches or branches where cash is completely automated [00:09:00] in parts of Europe and Asia Pacific. From both of your perspectives, what considerations do you think financial institutions need to be mindful of to ensure this success. Jim, maybe you can start off on this one.
Jim Flannery: Yeah, so cashless branches in the US or in North America in general, they're not as prevalent for a host of reasons, but I think if you are going to look at that as a potential path for a branch network, certainly having a hub and spoke concept where you do have full service [00:09:30] branches that fill the advanced things that consumers are looking to do, but using cashless branches to serve the more routine transactions. When we look at this for FIs as a service, what we're often looking at is the demographics of the people using that branch is a location where you have that high concentration of high self service consumers that are okay with that. They don't necessarily need that additional attention for simple things.
Jim Flannery: Making sure [00:10:00] that that's part of the equation, the analytics that's really going to drive the decision. I think also, at the same time, understanding if you're converting a full service branch or a traditional branch too of something of a cashless branch, deciding on the design and how the space is going to be used is going to be crucial, in particular for larger branches, where minimum going from 4,000 square feet to 1,500 square feet, so what do you do with the rest of the square footage? How do you either convert that to something [00:10:30] that has revenue generating capabilities or how do you reduce the size of that branch to reflect the role and function of that branch within the network?
Scott Anderson: Interesting, and I think that's something obviously a lot of the western European banks have already figured out, because of the cost of real estate. North America's really trying to catch up on that I see your points of view there. Tim, what would you add to that perspective and cashless branches?
Tim Hoover: Well, just not only [00:11:00] the advanced planning on the demographic and the placement and in the size, but then you get into another six months of planning on just the execution, so think about the cash and transit, think about the processes associated with not only cash replenishment but the cash in transit, the withdrawal of that cash and making sure that all those processes are determined, how the balancing is going to occur, because it will be different.
Tim Hoover: Then even probably the bigger [00:11:30] one is just thinking about the consumer now. This will be a big change. You just don't want them to walk into a branch and see no people or just have a bunch of machines lined up and now clue what's going on. It has been helpful and we've seen in the past a greeter in a lot of cases that can talk to the consumer about, "Hey, we've changed our design. We're now self service. Anything that you could do in this branch before, you can now do through the self service. Come with me. What kind of [00:12:00] transaction would you like to do? Let me show you how you can do it."
Tim Hoover: That helps in supporting certain consumer transactions if required. We've also seen, and it's been helpful, branches that have been sending out in advance, they're electronic or maybe some physical mailings talking about the changes, what's going on. You just don't want to have the consumer blindsided the first time they come into that location. In add to that even, there are on screen [00:12:30] text modifications or icons that can help a consumer actually do that transaction and we've seen even some labeling, additional labeling help with the consumer.
Scott Anderson: Interesting. I agree. I think swinging the pendulum too far too fast is probably not going to be effective and you need to make sure that the consumer is feeling comfortable, that the typical tell that they've dealt with daily or weekly is still a part of the equation. They're just maybe engaging with the consumer a little [00:13:00] differently and maybe even being a little bit more advisory versus just be transaction processing. I think that's a really interesting point. When we talk about all of this though, I think one of the big elephants in the room is going to be how do these financial institutions begin to process a road map or define a road map and a return on investment for this type of technology and solution. Jim, what are you seeing, how are you kind of guiding some of these financial institutions down that path?
Jim Flannery: Yeah, so the ROI and [00:13:30] the whole road map is of course extremely important for any transformation exercise that banks undertake and I think moving to something like a cashless branch is definitely a big change for an FI, so clearly being able to quantify as much as you can about the currently what's happening at that branch, what the expect ions are for how much of the volume is going to move to self service and which parts actually may move to other branches. We've often seen that when you do something extreme [00:14:00] like that, a lot of consumers will just go to the next location that has people, so you have to be a little careful making sure that the populist that's going to use that branch are the target segments that are going to embrace self service.
Jim Flannery: From the ROI perspective, obviously there's some pretty obvious cost saves that most FIs are expecting to see, but I think what becomes more interesting is the things that are a little bit more difficult to measure or monetize, which I think need to be part of that conversation. I think [00:14:30] a lot of FIs get too hung up on just the cold, hard numbers, when in fact there may be additional pieces that really are overall more beneficial to some degree of just that cost saving.
Jim Flannery: I'm talking mainly about the things that are around the consumer's acceptance and their satisfaction with the new space and also you can't understate the staff's satisfaction as well, being able to create an environment where the employees are more comfortable [00:15:00] and they thrive at their job and you can really get the most out of people who have maybe skills that are being underutilized in a more traditional branch environment.
Jim Flannery: I think being able to incorporate those pieces also should be part of the equation. At the end of the day the ROI has become, in our opinion, a must have. Every project that we have worked on where we have a big capital investment, the first thing people ask me, "Well, where's the ROI? Let's see the ROI." So being able to create that is definitely going to be [00:15:30] important.
Scott Anderson: Interesting, great. Thank you for that. That's probably the one thing that a lot of FIs need to think heavily about, but it is possible. We've seen a lot of FIs globally be able to achieve this with some great success. Tim, what or technological advancement should we expect from physical touchpoints such as recycling ATMs? What's coming down the pike?
Tim Hoover: Well, there are a number of ones coming down the pike. Probably the first is serial number capture and [00:16:00] that essentially means on the deposited notes, picking up on the serial number and in the case that it's needed, that can help in aiding any sort of counterfeit investigations or maybe stolen notes that were deposited at a certain ATM, at a certain location, but probably the bigger once is just thinking about predictive analytics, not only from the maintenance side of saying, "Hey, I can see maybe that this one sensor needs to be [00:16:30] adjusted or needs to be changed out," but we can do more from a predictive analysis and then possibly adjust that sensor remotely or definitely then if it's something that can't be adjusted remotely, dispatch a technician in order to perform that repair.
Tim Hoover: Also from the predictive analytics standpoint, just that the physical tracking and showing how consumers are conducting their transactions, [00:17:00] whether that's in a daily or weekly manner, at times of day, all that can be done now and is all inherent to the technology.
Scott Anderson: Great, so that really helps financial institutions fine tune how theses solutions can get rolled out, which I think is probably another important factor as they're thinking about this in a more holistic way, just making sure that that take up and that comfort with both consumers and the staff is there so that they endorse this. [00:17:30] Really, gentlemen, you've given us some interesting and compelling things to think about today and with that, I think this is a great place to wrap up this discussion for now. Jim and Tim, I really appreciate your points of view and sharing your thoughts with us and thanks again to all of you for joining us today.
Scott Anderson: If you haven't already done so, please check out our self service reloaded guide and learn more by surfing to dieboldnixdorf.com/driveroi for more information. Finally, to learn more about other relevant topics like these, log onto dieboldnixdorf.com [00:18:00] or click on the link in the podcast notes shown below. Until next time, please keep checking back on iTunes or however you listen to our podcast for new topics on COMMERCE NOW.