Personal Teller Machines

Most credit unions need branches today and well into the future to provide competitive convenience, tangible branded differentiation and a physical place to build relationships. At the same time, today’s branches must be less expensive and more productive, which requires new business models and branded experiences.

Personal teller machines, aka interactive teller machines or video tellers, are allowing credit unions to transfer physical transactions out of the branch to a call center. Based on the math alone, PTMs seem to be a solution that will drive viable financial branch models by reducing branch space and staff by 40 percent to 70 percent, while continuing to support the same level of deposits and loans.

While the popular trend is to evolve to PTMs, some credit unions and banks feel PTMs are only a temporary solution that could do more harm than good. At a recent banking conference, I learned of a number of institutions that are deciding to jump the “hype cycle” of PTMs. The rationale is that transactions are declining at the rate of 5 percent to 8 percent per year. Eventually, the vast majority of transactions will be conducted through mobile channels. Then what will we do with all these expensive machines? (PTMs can cost $65,000 to $85,000 per unit.)

The right answer concerning PTMs is different for every institution. Some credit unions are planning to convert all their branches to PTM transactions. Others are looking at a mix of branches using personal cash transactions in some markets and PTMs in others. And a number are just saying “no” based on the answers to five key questions:

(1) Are PTMs on brand for our institution and do they provide the right experience for our members and staff? (2) Should we apply PTMs to just new locations and retain our existing model in existing branches? (3) What are the market characteristics that suggest PTMs would be accepted in one market and not another? (4) Can we integrate PTMs into our existing systems? and (5) While we are focusing on lower-cost branching models, how can we ensure that we are simultaneously increasing branch productivity?

As you envision your credit union’s branch of the future, you have a number of options to consider. Over the past few years we have helped medium and large credit unions and banks determine if PTMs were right for their brand, then developed business models to deliver their new brand experience. Even if PTMs are not the right answer, a credit union can reduce staffing and space by evolving staffing models to universal associates, centralizing  a portion of high value services providers, centralizing safe-deposit boxes if still required, and integrating new messaging and communications technologies.

A few months ago I presented a webinar concerning 10+ branch business models for the future. These addressed both PTM and non-PTM models. A few examples:

• a small “spoke branch” with three PTMs, two universal associates and three hoteling offices;
• a transitional branch integrating PTMs in a unique entry that provides 24/7 secure access and central positioning in the branch during open hours; and
• a hub branch with four PTMs, two concierge stations, and highly trained staff for mortgage, small business and investments.

There are many variables that can tune each model to a specific brand and set of business goals.

As we learn more about PTMs from observation of our work and others, we need to ask additional questions during the branch business modeling, branding and prototype development process. These include the following:

• What strategies have been successful in integrating PTMs into existing branches and networks?
• How do you handle high value members who will not use a PTM?
• Can the PTM become an ATM when remote staff is not available?
• How can you provide secure 24/7 access to the PTMs and have them central to the member experience during open hours so you can maximize each face-to-face opportunity?
• What is the advantage of one manufacturer over another for PTM operation?
• How can you engineer the member and staff experience to ensure members increase their awareness and use of your products and services, while staff members are positioned to engage and build relationships with each member at every visit?
• How can you evolve to PTMs at the beginning of transaction declines and then reduce the number of and repurpose PTMs as in-branch transactions reach 25 percent or less? How can you ensure flexibility to accommodate inevitable change?
• How can PTMs support shared branching in ways that do not detract from your members’ experience?
• What is your capacity for deposits and loans with PTMs today and in five years?
• Does the addition of PTMs and the resulting new business model require that you rethink your branch delivery network? Should you have more small branches? How will this affect your real estate strategy and fixed asset ratios? How long will it take to realize maximum market efficiency and productivity?
• Are PTMs right for your brand or should you jump the cycle?

Answering the PTM and alternative delivery questions within the context of your credit union’s unique brand is critical to your success. PTMs are the best answer for some and the worst for others. These decisions must be made with an exceptional clarity of vision that is not influenced by bias, as your choices could result in millions of dollars spent on future branching and new ways of doing business that will impact your relationships with members and your bottom line. This process often requires an outside facilitator to help get you to the right conclusions.

We know that moving to PTMs can save 25 percent to 35 percent in operating costs, but we cannot build branch networks on savings aloPersonal Teller Machinesne. Unfortunately, recent studies tell us that while migrating to PTMs does save on operating costs, there has been no increase in branch productivity. The correct formula for future branch success must be branch efficiency plus high productivity. With the right process and players in place, you’ll be able to make the right decisions for today and well into the future.

Paul Seibert, CMC, is VP/financial design at CUES Supplier member EHS Design, Seattle.

Credit Union Management magazine’s Web-only “Facility Solutions” column runs the third Tuesday of the month.

This is also bonus coverage from “Best Thing Since Sliced Bread?” in the December issue of Credit Union Management magazine.