A New Human Connection


Interactive video ATMs draw attention as an alternative retail delivery option

By Katie Kuehner-Hebert

ATMs with video connections to bank staff in a centralized back office have been getting a lot of buzz within the industry. But are the machines really taking off as a worthwhile retail delivery option?

For some community banks, video tellers, sometimes called interactive teller machines or ITMs, can work well for select markets or under certain conditions, experts say. The most successful uses of the machines have been instances where they fit within an overall bank strategy that includes traditional branch tellers in some or even all of the locations, some community bankers and technology experts say.

“We have seen increased transactional activity since we’ve installed the because of the expanded hours.”
—James Johnson, PCSB Bank

Two years ago the $211 million-asset PCSB Bank in Clarinda, Iowa, started installing video ATMs at its branches in rural agriculture communities, which ranged in populations from 1,000 to 7,800, says James Johnson, the bank’s chief operations officer. PCSB Bank has begun replacing pneumatic tubes in its drive-through lanes connected to branch tellers with video ATMs connected to a central office.

The bank’s rollout plan for its video ATMs is to have 14 of them in all six of its branches within the next few months, positioned in the drive-through lanes and walk-up machines within the lobbies that can be accessed from 7 a.m. to 7 p.m. It also plans to maintain traditional ATMs at most every branch on the outside drive-through lane, which can be accessed 24 hours a day.

“We have seen increased transactional activity since we’ve installed the ITMs because of the expanded hours,” Johnson says. “People who like to interact with a live person prefer to use the ITMs, particularly during the off-hours.”

Tellers at PCSB Bank’s central office can perform most tasks that on-site branch tellers can, Johnson says. The bank’s video ATMs can dispense change, and in the future PCSB Bank may add other functions that enable tellers and the machines to issue cashier’s checks or even open accounts.

Video ATMs are roughly 1.5 times more expensive than traditional ATMs because of their functionality, but a bank typically can offset that extra cost by using the centralized tellers. PCSB Bank used cost savings to expand the central office’s teller hours. Consequently, the cost savings from the bank’s use of the machines was roughly a “wash,” Johnson reports.

“We implemented the ITMs because we wanted to reach our rural markets with a full-time banking experience,” he says. “A lot of smaller banks don’t offer the same hours and conveniences as do larger banks in metropolitan markets, so we’re counteracting that by providing the same level of service in a way that’s economically feasible for us.”

Video teller machines also can provide “a big opportunity” for some community banks to better serve communities that are underserved by financial institutions, says Paul Seibert, principal of financial planning and design at EHS Nelson, a retail bank design firm in Seattle. A few community banks are starting to deploy video teller kiosks in small markets or on community college campuses that might be served by a single staff member or a visiting staff member.

Video ATMs also can enhance security, Seibert says, because they “are even safer than staff behind bulletproof glass, as the only staff with access to cash is the manager or assistant manager and that can be controlled with a time lock.”

Still, some community banks haven’t considered the extra hardware investment in video ATMs worthwhile yet, Seibert says. And if branch transactions continue to decline at the current rate of 5 to 7 percent per year, he says, within six to 10 years branch transactions would be 10 to 15 percent of what they are today. That would reduce the number of video ATMs a bank would need to deploy, he points out.

While a few institutions are pursuing video ATMs, there seems to be just a bit of “a really neat solution searching for a problem” with video tellers, contends Dave Martin, executive vice president and chief development officer at Financial Supermarkets Inc., an in-store branch design firm in Cornelia, Ga. He says it’s yet uncertain whether customers will find that accessing a teller by video is an acceptable substitute for actual face-to-face interactions. Also, if community banks don’t handle video interactions well, the machines could backfire if customers perceive them “as a cost-savings play by the bank at the customers’ expense … whether it actually is or not,” he adds.

“For the foreseeable future, my humble prediction is that relatively smallish numbers of institutions will use these units as much for branding and to project a progressive image than for a significant shift in their business models,” Martin says. “That in itself may be enough of a benefit for them to justify the investment, but, again, it’s on a bank-by-bank basis.”

Katie Kuehner-Hebert is a freelance financial writer in California.