Editor's Note: Today's post comes at the courtesy of Terrina Rishel, CEO of ATM Authority, who interviewed Bert Watson, general counsel of United Bank in Zebulon, Ga. They discussed United's recent NCR APTRA™ Interactive Teller solution implementation and Watson's thoughts about how it impacted the bank’s customers, employees, operations and bottom-line. Below is the complete transcript from the interview.
(United Bank has approximately $1 Billion in assets, with 12 traditional branches and four store branches. They also have 22 cash dispense ATMs and 12 NCR APTRA™ Interactive Teller devices.)
Q—Being an attorney must give you a unique perspective. What is your perspective when you approach technology purchases?
A—I consider myself ruthlessly logical when it comes to purchasing anything. Given my background, I understand that you can’t win without building a good case. My legal knowledge has been extremely useful with launching the Interactive Teller solution because I am able to pull together and manage the Audit and Compliance teams as well as, have direct conversations with the FDIC.
Q—Were you specifically looking for branch transformation solutions?
A—That is an interesting question for several respects. The simple answer is yes. I had been discussing with a number of people the idea of how nice it would be to have a device we could place in the drive-thru lane that would perform deposit automation and recycle cash so we could reduce our workload. Everybody thought it was a great idea and they asked if there is such a thing? And I said, “No, there’s not such a thing.” So we started looking around and two years later I happened to be at NCR’s headquarters in a meeting where we were talking about branch transformation solutions. At the end of the meeting they asked if there was anything else I’d like to see. So I described what I wanted and basically described the APTRA Interactive Teller. As a result of NCR being able to meet our specifications quite well, we decided to move forward.
Q—What solutions did you compare? Or did you know that you wanted the NCR APTRA™ Interactive Teller solution?
A—I was aware that Diebold was trying to come up with a solution, but again, because of my legal background, I was familiar with the patents that Ugenius had applied for and been granted, and subsequently assigned to NCR when the acquisition occurred. And based on my understanding of their ITM patents, it will be quite difficult for someone to come up with a quick and easy solution that would bypass the patents and control that NCR had. That’s why I said I’m not going to waste my time with Diebold—there’s just no way they could go beyond a fairly rudimentary approach. Therefore, I felt that ITM was the right answer.
Q—Was that your tipping point to move forward? Or was there another critical point that convinced you to move forward with the ITM solution?
A—Well, let me explain one thing: I’ve been at this game for a long time. I had a rule that I never buy new technology in the first year it’s offered. Of course I knew that this had been offered by Ugenius for several years prior. But the bottom line was that this was NCR’s first year when we signed the contract. My normal rule would have been to wait a year and let others mitigate the bleeding edge. But as I reviewed the marketplace and our competitors, and weighed what I believed to be the limited alternative solutions that would be available down the road—also the migration of a large demographic toward mobile apps—I felt like the only way to really get a strategic benefit from this product was to move-in quickly. We didn’t want to be perceived as a bank that brought this in after the big banks already had it. Waiting for the market to become mature would have been a mistake.
Q—How long did it take you to decide to purchase the Interactive Teller Solution?
A—Not long at all!
Q—What was your deployment strategy?
A—We decided to deployed two ITM units at a time and currently have 12 live devices. That was on purpose because we put them into some smaller locations so we could test out any potential issues. We had some sunlight issues at one location where we ultimately decided we needed to plant some trees to block the early morning sun. The little details need to be worked out in every location. We had to replace the drive-thru lights because in many locations it was too dark for the ITM tellers to see people in their car.
Q—How do you think your competitors feel?
A—Some of them really don’t like us anymore. Truly! Because when we had some really interesting ice and snow storms hit the Atlanta area, we were the only bank open on some of those days. The ITMs came up at 7 in the morning and they stayed open until 11 at night, and people were so surprised that we could stay open. Customers could really see a difference in our ability to serve the community. This technology provides us with the ability to do things that we couldn’t do before. When I suggested that we be open 7 days a week, 7-11, we realized that the customers want to do banking on their terms—and we are really customer-centric.
Q—How important was a ROI analysis?
A—United Bank would never consider buying a product without performing an ROI or cost-benefit analysis. We did our ROI/payback period for 5 years or less because we felt it was important to create a worst-case scenario because of the bleeding-edge factor. Typically we would have been looking at something more in the neighborhood of 3 years. And yet I think it will end up being a three year basis because customers seem to really enjoy this product. If it had not paid for itself in a rational period of time, we would not have done it.
Q—Were you concerned about consumer adaptation?
A—Of course! In fact it was a major concern. Anytime you have technology competing with human beings you’re at risk. We all like to deal with human beings. Maybe the younger generation is not that way, but most of the older generation would prefer to deal with a person instead of a machine. But we’ve seen a real change in places like grocery stores and retail where they have self-service checkout and it seems to be a common acceptable thing. So we didn’t feel like this was a radical shift for most of our customers. But we knew there would be some holdout for green eye shades and quill pens. Just like gas stations, I would suspect that consumers are going to adapt and embrace this technology. I say that because if you want to perform complex transactions before 9am and after 5pm, you will need to use the ITM. I think it’s a nice trade off! We have been able to cut the overall hours of our traditional tellers by close to 50% in some of our locations. We have reallocated some of those people to different roles and have actually added staff because we are serving our customers longer. Part of the beauty of this technology is that it allowed us to extend our hours and leverage our workforce more efficiently.
Q—How does the ITM experience compare to a pneumatic tube?
A—I think this is truly a better experience than a pneumatic tube. And virtually everyone who uses the ITM will say that. The pneumatic tubes are just barely adequate and I don’t think they are a positive long term solution anymore.
Q—Have you seen a decline in transactions performed at the traditional teller line?
A—Yes, I have both statistical and anecdotal data that tells me that this is becoming an extremely successful way to migrate people away from traditional teller lines. Anecdotally, we’ve got one customer that I have known for years, she has a restaurant and typically makes 3 or 4 deposits a day—and all she talks about is how wonderful the ITM is. The reason is because she feels very safe using the device after 5pm and she doesn’t have to worry about meeting any cut-off times because we extended our cut-off to 11pm at night. And she also feels like this is a much better solution than a night depository. We prefer to avoid the dual control need with night depositories. So we’ve been migrating a lot of people to this technology and what we’re seeing is the former rush that took place when our deadline was earlier, is now being spread over later hours throughout the afternoon and evening.
Q—How has this impacted branch peak usage hours?
A—Our busiest time used to be between 5 and 6 pm. People were coming after work and using our drive-thru before we closed the branches. Now we are seeing people coming 6, 7 or 8 pm and also coming before work at 7am. Because of the lower cost per transaction, it’s worth it to be offering the longer hours.
Q—Do you think this will ultimately earn United Bank more market share?
A—We are already seeing customers that are coming to us because of the ITM. Their friends tell them that they can use United Bank at 10 at night and cash a check to the penny. They realize there are other technologies that can provide cash such as an ATM, or you can use your mobile phone to take a picture of a check and make a deposit, but there are still many transactions that can’t be performed without a financial institution being open. Depositing a check and withdrawing money at an ATM is cute, but if I want to do exactly what I want to do—the ITM is a better solution. My son uses his IPhone to take a picture of a check to make a deposit, and it works great. But there’s certain things he still can’t do unless he goes to an ITM.
We’re not trying to force people into one channel. Our goal is to provide whatever channel they want to use because we want the customer to pick how they want to do business with us. But we also want to try to make it as efficient as possible—if we are going to have a teller working on a Sunday, we have to be able to see a fairly inexpensive transaction cost—and that’s what we are seeing with the ITMs. Surprisingly, our Saturday and Sunday volumes now equal one of our weekday volumes. Which tells me that consumer behavior is changing and they are choosing to not worry about bank hours anymore, and they are more comfortable with technology. I never want them to feel a barrier between us and them. We want to reduce barriers while at the same time we encourage them to try new technology.
Q—How did implementing the NCR APTRA™ Interactive Teller affect your ATM strategy?
A—We decided not to take deposits at ATMs anymore. Our thought process was this: the only people that make deposits at our ATMs were our customers. There’s no foreign deposit transactions coming through. So from our point-of-view it seemed logical that the ITM was a place that our customers could make deposits and the ATM was a place that customers and non-customers could go to get fast cash. We’ve intentionally tried to make sure that no one perceives the ITM as an ATM. Granted, you cannot make a deposit at United Bank between 11pm and 7am, but we haven’t found that inconvenienced anyone. It just made sense to us to have teller functions at the ITM and define the ATM as a place to get cash with an ATM card. We’ve had no push-back on that at all. And you need to remember that the Intelligent Deposit at the ATM is not a cheap solution. The ITM is not cheap either, but the difference in price versus the value-add was not cost-justifiable—not when we could just skip that investment and go straight to the ITM. So as a result, we have relatively inexpensive ATMs, and we can have our ATMs and ITMs balanced once a month at the same time, which created even more efficiencies and allowed us to reinvest those monies that would have been focused on balancing our ATMs daily—into more ITMs.
Q—You really didn’t get any push-back from removing deposit capability from the ATM?
A—If we had our ATMs placed in a 24 hour situation like the Atlanta Airport, maybe we would have received some push-back. But even if that had been the case, my solution would have been to just place an ITM next to the ATM and open the ITM 24 hours a day.
Q—How do you feel about the ITM not being an ATM?
A—We did not want the consumer to be confused about what the device was. We also did not want our customers waiting behind foreign transactions. It made sense to just add another cheap ATM if the volumes justified it.
Q—Was your staff concerned about the impact this would have on operations, tellers or any other aspect of your organization?
A—We assured our people that some of the roles might be different, but there would actually be more jobs—not less. The reality of course is that ITM operators have a different skill-set, so not all of our tellers were automatically moved into those roles. We took a very proactive approach to making sure that everyone found a role that they felt good about doing. With our ESOP, our bank is owned by about 92% of the people that show up to work every day, so taking care of their needs is very important to us and we had to make sure they were on-board.
Q—Do you plan on expanding this solution into new locations?
A—By the end of 2014, we will probably have about 14 or 15 ITMs implemented. We will probably spend Q1 of 2015 performing an impact analysis before we deploy any more. I would suspect that we will probably implement another 15 next year and probably max-out somewhere around 45 ITMs ultimately. We would like to see a market presence with a strategy of micro-branches, where ITMs are handling the routine transactions and our staff working in concierge and lending-focused roles. This would allow us to reach markets where we couldn’t afford a traditional branch. We will probably have a mixture of strategic branches, with some being the larger more traditional, and some being the micro-branch style.
Q—It sounds like with your targeted approach to retail delivery, that you could see a day where the need for vaults and traditional tellers are no longer a necessity-- is that correct?
A—We’ve been doing an in-depth analysis of our branch network. We are taking a hard look at what types of transactions are taking place in each type of branch we have. We absolutely expect to create a micro-branch, and in 2015 will probably be developing an urban market where we can do exactly that—vault and teller-free, utilizing the ITMs.
Q—How will you judge whether or not the NCR APTRA™ Interactive Teller was a success? And what timeframe will you use?
A—We are not like big banks…we can’t afford to screw up! We don’t have the luxury of throwing money at something that will fail. ITMs will be a success for us and in 5 or 6 months I believe our team will look at this solution and say, “We sure are glad we did that!”
We jumped into this with both feet. We didn’t just do a test with one or two units. We knew that it was going to take several ITMs to make the impact that we needed it to make. So we were committed from the beginning to pulling this off. We assigned this project to one of our most senior level vice presidents for this first year, because we wanted the best of the best to run it. We pulled out all the stops and we did everything we could possibly do to make this work. We didn’t nickel and dime the details. Because if we didn’t do it, we would have handicapped the solution. Whatever it takes—when we decide to do something, we’re all in! In my opinion, you can’t make it a success if you only do two machines. I think you need 10 to 15 ITMs to understand if it will be a success. And after we invested those kind of monies we were all on board! And failure was not an option!
Q—What, if any advice would you offer to those considering the ITM solution?
A—We have hosted many visiting banks and the biggest issue that we see is that many of them are trying to box this solution into a set of traditional banking rules. This is not an ATM, and it’s not a Teller. It requires a new broader approach and way of thinking. As an example: 80% of a teller system was designed to keep up with how much money is in the teller drawer. With the ITMs, multiple tellers are in multiple machines. It’s simply not the same—the old fashion way of balancing doesn’t make sense. Our auditors initially wanted these machines balanced once a day, but when they realized that the tellers can’t touch the bills, they understood that balancing the machines once a month was more appropriate. It takes a new operational mindset to do this and it’s helpful to speak with people who have used it, so you don’t waste the efficiencies that this solution can deliver operationally.
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