ATM or ITM

In today’s on-demand culture, financial institutions can’t expect their clients to remain loyal to archaic service delivery models. As the millennial generation takes on more buying power, their behaviors and preferences will become increasingly important. For example, 58 percent of customers under 45 considered the quality of a mobile app when looking to switch banks.

The final reason to use more financial technology? It simply makes economic sense. According to a 2012 study, each in-person interaction with a bank teller costs the business $4, compared with $0.17 for digital financial transactions and $0.70 for an ATM. By implementing new technological solutions, financial institutions can cut expenses and increase revenue while building deeper relationships with customers in person.

ATMs have several advantages over in-person transactions, which is why three-quarters of Americans use ATMs as part of their day-to-day banking. These benefits include:

• 24/7 banking: ATMs can be used both during and outside normal business hours, as long as the machine is stocked with money. This is highly convenient for customers who may not be able to come into a branch during the daytime.
• Location-independent: ATMs don’t need to be attached to a branch of the bank that owns them. In fact, some of the most common locations for ATMs include restaurants and bars, gas stations, supermarkets, and hotels. This gives customers access to banking services even when they’re not near a branch.
• Lower expenses: As noted above, transactions at an ATM are far more cost-effective for financial institutions than transactions with a live teller. There’s no need to pay salaries and benefits for an ATM, the only costs are hardware, software, and maintenance.

Of course, ATMs aren’t a perfect solution or a total replacement for in-person interaction. Some of the drawbacks of ATMs include:

• Future-proofing: Like any other technology, ATMs age and become outdated. It’s essential to future-proof your ATM fleet to ensure that you can still meet customers’ demands. ATMs that can’t be updated to add new functionality will reduce customer satisfaction and hamper your competitive edge.
• Availability: ATMs work well when they’re available, but can be a major customer pain point when they go down or run out of cash. This is especially true for community banks and credit unions that may not have a nearby branch. In today’s on-demand, 24/7 world, people will get frustrated if they can’t easily complete their transactions.
• Security: While reasonably secure, ATMs are still susceptible to crimes such as robbery and fraud due to their external location. Some thieves mug ATM users while they’re completing a transaction, while others physically remove the entire device. In addition, criminals can install fake card slots called “skimmers” that read the information on a card’s magnetic strip.

The cost of an ATM can vary widely, but the median price tag is roughly $30,000. To get an accurate estimate, however, you’ll need to account for considerations such as:

• Base price: The base price for an “island” drive-up ATM ranges from $26,000 to $34,000, depending on the vendor.
• Installation: ATMs typically weigh more than a ton and require technical knowledge to set up, so the transportation and installation costs are high. You should budget anywhere from $1,500 to $3,000 for these services.
• Deposit automation: Envelope depositories are no longer offered by any ATM manufacturer. Deposit automation allows you to instantly credit customers’ accounts and provide images on printed receipts that prove the deposit was successfully completed. The hardware cost of adding deposit automation carries a price tag of $12,000 to $25,000. In addition, the backend process for getting items from the ATM to your back office clearinghouse costs an additional $15,000 to $30,000.

If you plan to install an ATM with deposit automation, you have even more work to do beforehand. The components of deposit automation are:

• Cash and check deposit module hardware: Modern ATMs with deposit automation allow customers to deposit both cash and checks in bulk, together or separately. This slashes transaction time by half while adding convenience for the customer.
• Consolidation and validation server: Images of the cash and checks from the ATM must be sent to a server where they are stored and validated. You can either host this server yourself in-house or have it hosted and managed for you. Both options differ in terms of cost and suitability, depending on your business needs and requirements. In-house solutions typically cost $15,000 to $30,000 up front with 15-20% annual fees.
• Image transfer agent: The image transfer agent is software that resides on the ATM that isolates check images and encrypts them for transfer to the server. This agent and its license are purchased directly from the service provider; costs are typically in the hundreds of dollars.

The top ATM vendors in the United States include:

• NCR: The Atlanta-based NCR (The National Cash Register Company) currently enables 700 million transactions every day.
• Hyosung: First entering the U.S. market in 1998, South Korean ATM manufacturer Hyosung has since grown to become the largest and fastest-growing ATM provider in the country.
• Diebold: Perhaps best known for attaching its name to the electronic voting machines, Diebold has been in the ATM market since the 1970s.

• Savings per transaction: ITMs and ATMs drastically reduce your per-transaction expenses—from $4 with an in-person teller to below $1 for a self-service device.
• Operational efficiency: The vast majority of transactions performed by a teller can also be handled by an ITM: cash withdrawals, check cashing, cash and check deposits, and loan payments.
• Revenue growth: ITMs free up your branch employees to build deeper relationships with clients who require human interaction. In addition, ITMs represent the opportunity for cross-selling and upselling when tellers are chatting with customers, informing them about new services and opportunities.
• Increased convenience: While employees aren’t available 24/7, ITMs usually provide live video beyond a branch’s standard operating hours. In addition, tellers can provide assistance to customers who have lost or forgotten their ATM cards. By showing the teller a valid ID, customers can still verify their identity and complete a transaction.
• Competitive advantage: ITMs are a relatively new innovation, which makes them interesting and memorable for your customers. Deploying ITMs can be the key differentiator between your business and your competitors, especially for market segments such as millennials that are attracted to innovation.
• Greater market presence: Because ITMs can perform nearly all of the tasks done by a live teller, they can extend your reach at a fraction of the cost of opening another branch. You can strategically install ITMs in high-traffic areas such as college campuses, retail parking lots, manufacturing plants, and malls, increasing your brand recognition and market footprint.

Despite the numerous benefits of ITMs, there are several logistical challenges to overcome. The relatively high cost of implementation, staff training and scheduling, and high cost of IT infrastructure can deter some institutions from making the investment in ITMs.

• High cost of entry: Like ATMs, ITMs have a high cost of entry, with an average total cost of $60,000 to $80,000. You may have to install multiple ITMs in order to begin seeing the benefits of scale listed above. In addition, ITMs incur more expenses than ATMs, including the operating costs and salaries to run a call center and a high-bandwidth network connection to enable video chat. This leads some institutions to consider ATM outsourcing as a strategy.
• Staffing challenges: Your branches may only be open weekdays from 9 to 5, but customers will likely want to use the ITM beyond normal business hours. Deploying an ITM requires tellers who can work shifts in the early morning and late evening. You’ll also have to decide how to handle times of peak capacity, when all the remote tellers at your call center may be occupied.
• Call center implementation: Not all institutions have invested in a call center environment, so ITMs may require you to make this additional investment.
• Extended transaction time: Interacting with a teller usually takes longer than using an ATM for the same transaction. In addition, if customers are required to speak with a teller for every transaction, they could be left waiting during hours of peak usage.

ITMs are a highly useful tool for improving your branch security. Like ATMs, ITMs help to reduce the circulation of cash at your branch among tellers, making it a less attractive target. They make it easier to reconfigure your branch layout with security in mind with no need for bulletproof glass, placing tellers in the locations that make the most sense.

Of course, the biggest security advantage that ITMs have is the use of virtual tellers. By moving tellers to an offsite location, it’s much less likely that your branch will be robbed, which improves morale and satisfaction among your employees.

The ITM installation process is very similar to the ATM installation process, with a few added considerations. As mentioned before, you’ll need to verify that the proposed location has a high-bandwidth connection, so that video chats with tellers won’t be disrupted.

In addition, if deploying your first ITM, you’ll have to deal with the logistics of running the call center, including training employees, finding office space, and setting up the IT infrastructure.

The two main ITM providers in the U.S. are Hyosung and NCR. Although Diebold has deployed an ITM solution in a few larger banks, it has yet to see broader market rollout.

Hyosung focuses more on allowing customers to do transactions in self-service powered by core integration. The core integration allows 80 to 90 percent of transactions to be done without teller assistance. This enables a greater number of self-service transactions so that live tellers can spend more time on meaningful client engagement. ActiveTeller allows assistance in-lobby to be done via tablet or utilizes remote video to support drive through or provide addition in-lobby support. 

NCR, on the other hand, offers the video teller solution Interactive Teller. Instead of focusing on self-service, as Hyosung does, NCR ITMs are intended to centralize and scale face-to-face interactions between tellers and clients, replicating the traditional branch experience.

The decision of Hyosung vs. NCR ITMs will therefore depend on the branch strategy you want to pursue. If you want to encourage self-service and more personal relationships with clients, then Hyosung is your best option. On the other hand, NCR is likely better if you want to centralize the teller function at scale, i.e. for financial institutions that are spread across a wide geographical area.