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Interactive teller machines (ITMs): the convenience of an ATM plus personal service

By Paul Gores

While some financial institutions still are considering whether to install interactive teller machines, Wisconsin banks that already have invested in ITMs say they’re becoming an increasingly important part of their business strategy.

ITMs — essentially enhanced-function ATMs that let a customer speak with a teller via a video screen — allow in-branch employees to focus on higher-level interactions with customers while the technology handles routine transactions, bankers say.

Wisconsin bankers using ITMs say their customers, in an increasingly video-driven world, want them and quickly become accustomed to them. And they note that when the coronavirus pandemic shut down branches in 2020, they were a godsend.

“It can do deposits, withdrawals. It has the convenience of having more than just $20s,” said Lisa Schwalen, retail market manager for Bank of Luxemburg. “It can change the PIN on your debit card. Loan payments. Really, anything you can pretty much do over the teller line, you can do at the ITM.”

Banking equipment vendor NCR Corporation calls the ITM a “branch in a box.” Among its functions, according to NCR, an ITM can be used to: get cash, deposit checks, cash checks to the penny, handle bill and loan payments, transfer funds to any account, order replacement cards, process savings bonds and redemptions, process CD renewals and inquiries, and issue money orders.

Bank of Luxemburg placed its first ITM in a local grocery store in January of 2021.

“Ultimately it’s the flexibility that we are hoping to bring to our customers to allow them to do some banking not only outside the traditional banking business hours per se, but also to give them the convenience — going to the grocery store and having it there,” Schwalen said.

Bank of Luxemburg now has two other ITMs, including in a branch drive-through lane, which is how many banks are using them. The ITM essentially replaces the old tube system for exchanging checks and cash between a driver and a teller inside the branch.

At Madison’s Park Bank, ITMs are in the drive-through lanes.

“We’ve ripped out the tubes and put them in our drive-ups,” said Jeff Kurek, vice president of information and cyber security for Park Bank.

Park Bank had ITMs in place before the word “COVID” became part of everyday life.

“They were great during the pandemic,” Kurek said. “During the pandemic, the lobbies were all shut down. We were told to shut down. And we had employees who still had jobs to do. So the customers went up to the ITM. They could open up a bank account if they’d so choose. They were a lifesaver during the pandemic. We had full-service branches because of them.”

Kurek said Park Bank invested in ITMs, in part, because customers indicated they wanted them.

“The customer is always asking for the latest and greatest technology,” Kurek said.

The Stephenson National Bank & Trust in Marinette also was ahead of the COVID curve, installing ITMs starting in 2017. Elisa Rollo, senior vice president and chief retail officer, said the bank was looking to modernize its technology offerings for customers, and, among other factors, consider future staffing needs.

The Stephenson National Bank & Trust has 16 ITMs.

“We have three dedicated people to those 16 machines,” Rollo said. “If and when we decide to put more machines in, we would probably not add staff right away. I’m assuming they can do up to eight [ITMs each], and they’ve got it timed so well to where they know their customers’ traffic flow and the items that they’re handling.”

According to a survey last year by the branding firm Adrenaline, even though ITMs entered the market in the 2010s, most ITMs have been put into operation in just the last five years. Juliet D’Ambrosio, Adrenaline’s managing director of strategy, said in a report that ITMs were a self-service technology that “serves as a bridge between the physical and digital, improving customer experience and increasing revenue per customer.”

“It can serve dual purposes — automating routine banking activity while providing access to bankers for higher-value consultations,” she said.

John Kaprelian, vice president and retail manager for Marshfield-based Forward Bank, shares that view.

“I think what we’re going to see is a continued shift toward branch staff being used primarily for the value-add activities that require humans — that people are better at than machines. Giving advice, opening accounts, answering questions, lending — those sorts of things,” said Kaprelian, whose institution began using ITMs a year ago. “And the teller work is really going to become a secondary responsibility of that staff and will be an increasingly small part of their day-to-day activities.”

Some banks have reported that once customers become comfortable with ITMs, they often don’t need to contact the teller who is staffing the ITM to conduct a transaction.

Customer adoption and price are two of the main concerns of banks considering an investment in ITMs.

To encourage adoption, Bank of Luxemburg temporarily posted a banker near its grocery store ITM to show customers how to use it. The bank also filmed a YouTube video explaining the ITM.

Rollo said those monitoring usage at The Stephenson National Bank & Trust’s ITMs were a little surprised at how quickly older customers took to the new technology.

“We thought the older people aren’t going to adopt as quickly. Well, those now are some of our biggest advocates for the technology,” Rollo said. “They love to walk up and press a button, or never get out of their car, and they don’t have to see a person face to face. They can hear better with them, see a person better than you can in a drive-through through window.”

Kurek said customers needed some assistance at first.

“They needed some help, like with all change,” Kurek said. “We helped and we assisted, and I would say the pandemic escalated that. It changed the way people were doing things.”

Said Karen Berg, customer support manager for Forward Bank: “Actually, our customers have been really accepting of the ITMs and they have caught on pretty fast.”

An Adrenaline report from 2021 found that large majorities in all generations thought they would be extremely or very comfortable using an ITM: Millennials, 86%; Gen X, 85%; Gen Z, 80%; and those 55 and older, 72%.

The issue of price may be what’s holding some banks back on an ITM investment, although Adrenaline found that 60% of banks plan to deploy them by 2024.

A report last year by the financial institutions consulting firm Bancography explained the potential cost of that first ITM.

The report said if a bank already operates ITMs, the marginal cost of adding another probably would be less than $100,000.

“However, a critical challenge of implementing ITMs lies in the initial setup cost,” the Bancography report stated. “The back office infrastructure required to establish an initial ITM (building connectivity to the call center, systems integration, etc.) can cost $300,000– $500,000. So, assuming the midpoint and $85,000 for the machine itself, the first ITM costs $485,000.”

But if the initial rollout is bigger, the fixed infrastructure cost is amortized to a more reasonable level, Bancography said.

“The first one you put in definitely is costly just because you’re not only buying the machine, but the bank also has to build the parameters and the data input and the software to run the machine,” said Bank of Luxemburg’s Schwalen. “That usually is about three times the cost of the actual ITM. Once you get the first one down, the second ones obviously are a lot more reasonable. The average ITM, depending on the company — there’s different vendors out there — I would say they are in the neighborhood of $60,000 to $80,000.”

Rollo said when The Stephenson National Bank & Trust was making the decision about ITMs, its ATMs were getting to the point where they needed to be replaced anyway.

“The opportunity to do it — and do it the right way — was there,” she said. “They do cost — probably I want to say — double what our normal ATM would cost. That includes the infrastructure to make the system work.”

Bankers using ITMs in Wisconsin said the machines provide additional opportunities for local bank employees who want to be involved with the new technology.

“When we started converting the drive-ups, we never eliminated any positions. We didn’t know how many people we were going to have to have behind the scenes and running these drive-ups,” Rollo said. “We started out slower and had four of the drive-up people converted — we call them interactive service agents. They were universal bankers and tellers that transitioned into this role. We didn’t hire anybody specifically for the role.”

The bank still has two of those four original interactive service agents — “They’re really good at what they do,” Rollo said — and the bank also has cross-trained some other universal bankers and contact center employees as back-up.

Even as ITMs catch on, bank leaders don’t foresee a day when traditional face-to- face tellers and front-line bankers will disappear.

“Technology is not perfect. Technology will not replace our people,” said Park Bank’s Kurek. “It’s only going to enhance our customer experience. The technology is a response to needs, to us listening to what they’re asking for.”

Forward Bank’s Kaprelian said he doesn’t think tellers are going away.

“There are certain activities that ITMs just aren’t very good at handling, and you’re going to require staff — humans — to actually do it,” he said. “I don’t think that’s going to change for quite a while, if ever.”

Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years.