Why big banks are exploring shared ATMs

Shared ATMs have been the norm among community credit unions for the last few years, but major banks are starting to dip a toe into the water.

“We are exploring shared ATMs, as they could help lower distribution costs and provide ATM access in places that wouldn’t otherwise be economically feasible for us, but choosing the right partner is critical,” said Troy Cullen, evp ATM and Debit Services, U.S. Bank. “We want to ensure the machines are surcharge-free for our customers, we want our customers to easily know that they’re surcharge-free and we want the experience to be consistent for them.”

It’s a common tactic for community credit unions. For the past five years, Co-op Financial Services, a California-based network of community credit unions with reach across the U.S., has worked on eliminating outside ATM fees by creating a network of shareable ATMs among affiliated institutions nationwide. It’s a play to get more customers.

“It allows more account access — there are some credit unions that have deployed these solutions to expand their geographic area through a self-service model where it would have cost them to install a brick-and-mortar branch,” said Terry Pierce, senior product manager at Co-op Financial Services, noting that credit unions that are part of the network often have a small number of branches.

Any customer of 1,800 participating credit unions can access a network of ATMs nationally along with over 5,000 brick-and-mortar branches that serve customers’ needs. Customers can access a network of 350 ATMs nationally by logging into the shared branch network with their account number and a piece of identification. The shared ATMs don’t have specific branding, but the infrastructure lets customers carry out deposits, withdraw funds, transfer money and pay loans.

It’s a way credit unions can differentiate themselves from the bigger players, cut costs and expand their reach at the same time.

“Most credit unions have a small number of ATMs and their footprint is very small,” said Heather Gibbins, senior director of global software product management for Diebold Nixdorf, the ATM manufacturer Co-op Financial Services worked with to develop the shared branch and ATM network. “We partnered with Co-op to allow members of institutions to get the same level of service as they would get from their own institutions.”

While offering additional access points for customers may seem like an option that customers of major banks could benefit from, analysts say bigger players don’t have the same incentive, both due to the cost and the risk of watering down a differentiated experience from a brand.

“It’s like a bait and switch in the view of the brand operators because it’s like saying the brands are interchangeable, and they’re saying, ‘Heck no, we’re not going to do that; we want to be in control of the experience,'” said Bob Meara, senior analyst at Celent. The banks also have to cover the costs of the transactions on the network, which could be significant for big institutions, he added.

Others add that the fees that derive from non-customer transactions at ATMs are a revenue generator for the banks.

“Larger banks don’t have as much of an incentive because they already have well-established ATM networks and can generate fee income when non-customers use their machines,” said Aubrey Hawes, senior director in the Financial Services Global Business Unit at Oracle Financial Services.

Regardless of the convenience of shared ATMs, Pierce said user adoption of them has been slow, which is prompting Co-op Financial Services to relaunch the service next month with a new marketing push.

“It’s really about effective communications, marketing, training and education — a lot of the time technology is deployed with no follow-through,” she said. “There needs to be a lot more collaboration as far as training and educating the staff along with the members.”

Mobile-first, but not digital-only: Why the bank of the future may still center around people

With the talk of “employee-less branches,” bots and cognitive agents, the notion of being able to meet all of one’s banking needs without any kind of human intervention may still be quite far off.

While the decline of the old-fashioned retail bank branch is well-documented  — a JLL study estimates that the number of bank branches in the U.S. is expected to drop 20 percent over the next five years — recent research shows people still want to come into a branch. Banks — even so-called virtual ones — are experimenting with technological solutions to get the mix of human and virtual interaction right.

“Branch revenue growth has slowed down, and a lot of financial institutions are looking at how to address that,” said David Albertazzi, senior analyst at Aite Group. “They’re trying to figure out how to maximize their yield on their most mature channel, the brick-and-mortar branch.”

For one new entrant in the virtual banking space, Luvleen Sidhu, president and co-founder of the branchless BankMobile, the branch won’t disappear, but its purpose will change.

“Although we are a mobile-first strategy and we bank millennials with an average age of 27, about 60 percent of our customers feel a bank branch is important to establishing a primary banking relationship,” said Sidhu. “It adds an element of security and credibility.”

The virtual bank, which was set up two years ago and has two million accounts, said it will open up “pop-up branches” at universities to reinforce the connection to customers. Another new virtual bank, Iam Bank, will launch in the U.S. this fall with customer experience centers on the ground. These smart branches will be equipped for technologically-savvy customers, but in-person staff will guide those who need a little more help.

“We will also have behavioral psychologists and independent financial advisers at our member experience centers, so that members can speak in confidence with professionals who will hopefully be able to help them through managing their finances in difficult times,” said Simona Stankovska, Iam Bank’s head of communications.

The incumbents aren’t saying much publicly on their future plans, but recent moves show they are experimenting with the right amount of ‘human touch’ combined with digital tools. Among the big banks, Citi has opened digital branches where customers review their banking details on computers while bank staff members assist. Bank of America’s minimally-staffed branches let customers make the most of mobile banking tools and allow them to connect to banking representatives through video conferences, with employees on hand to provide guidance when needed.

“Although our clients are using our digital tools more and more, they still rely on in-person conversations with financial center professionals for some of their more complex financial needs, such as buying a home and saving for retirement or college,” said a Bank of America spokeswoman.

The new type of brick-and-mortar branch allows a more digitally-literate customer to stay connected to the brand.

“If financial institutions are able to make their branch more digital, they’ll be in better position to drive incremental sales, build customer loyalty and provide that outstanding experience that customers are looking for,” said Albertazzi.

For Samsung, which said it’s working with many leading U.S. banks on branch modernization through technology, the branch that acts as a fast track to expert advice is what meets younger customers’ expectations.

“Millennials still want to visit the branch, but they don’t want to meet with generalists as much, they want to access experts much more quickly — they’ll want to speak to a mortgage adviser about a mortgage, and branches need to invest in technological solutions to have video conferencing capability,” said John Curtis, vice president of regulated markets at Samsung.

Curtis said the company is working with banks to make the banking experience more seamless for customers, allowing them to easily video conference experts, with branch employees available to assist when needed.

The branch, said Sidhu, is becoming more of a tool to retain customers than to attract them.

“I think what’s dead is the branch serving as the primary customer acquisition strategy for banks,” she said. “Banks are only opening one net new checking account per branch per week —  through our unique strategy of replacing branches with technology we are opening about 10,000 accounts per week. This is the future.”

 

[podcast] How to build a bank with no branches with Card.com’s Ben Katz

card.com is an alternative to bank branches

Wall Street has been shedding Main Street bank branches of late and it doesn’t appear like it’s letting up any time soon.

Card.com's Ben Katz
Card.com’s Ben Katz

As more financial transactions occur over the web, the purpose of a bank branch is changing and for many banks, they just can’t make them profitable anymore. Upstarts smell an opportunity and they’re stepping in by creating branch-light banking alternatives.

Ben Katz, founder and CEO of Card.com, joins us on the Tradestreaming Podcast. His firm provides most basic banking functions without any physical branches.

When you talk to Ben, he likes to make a simple analogy that drives home how his firm and others are forming an alternative to a bank branch: Just as Netflix is to Blockbuster, Card.com is to Wells Fargo.

We spend the bulk of our conversation discussing how his debit card solution, tied to an affinity or brand his users love, can compete against the branch footprint of some of the largest U.S. banks.

Listen to the FULL episode

Here’s what we discuss in this episode of the Tradestreaming Podcast

  • How branded financial services resonate with customers differently that incubent offerings
  • How, by partnering with non-financial brands that people love, financial services can tap millions of potential customers on Facebook cost-effectively
  • Why banks struggle with the cost-structure required to service retail clients
  • How customer service is handled for financial services that function without physical branches
  • The evolution away from call-center focused service to self-service solutions that can actually provide better and more accurate service
  • Tying proactive telephone service to a user’s app in an effort to proactively identify a user’s service question before he or she begins dialing the 800 service number
  • Whether bank licensing makes any sense for financial services operating outside of lending

More resources

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