As the world gets more and more comfortable with technology like video chat and continues to prioritize speed over more traditional processes, it’s natural for industries to adapt to those preferences.
Interactive teller machines are a great example of modernization in personal financing. These machines are essentially an evolved ATM, and while somewhat limited in utility, they’re providing an interesting option for financial institutions to serve customers in extremely rural or urban areas.
We’re going to cover what an ITM or interactive teller machine is, its pros and cons, and where this technology is headed next.
What is an ITM or interactive teller machine?
An interactive teller machine, or ITM, is essentially a "branch in a box" system that uses a combination of touch screens and video technology to offer a virtual version of the in-person banking experience.
You can think of it as an ATM with live video chat. Customers can walk up to the ITM, press begin, and start a video conversation with a live operator based anywhere in the world. This operator functions just like a bank teller inside a normal bank and can perform a variety of services for the customer.
ITMs can replace traditional banks entirely or be placed alongside a larger physical location with live staff inside to handle more complicated requests. Some banks also like to keep an ITM open outside of normal banking hours to give customers more flexibility.
What can customers do on an interactive teller machine?
ITMs have a live person on the other side of the screen, so by using electronic signatures and ID verification they can perform pretty much any service needed, including:
- Giving cash withdrawals
- Accepting cash deposits and checks
- Paying down loans
- Bill payments
- Opening new checking and savings accounts
- Getting new debit or credit cards
- Facilitating cash advances
- Offering financial advice
- All business account operations
- Brokerage and equity account transfers and withdrawals
- Money orders and bank checks
Pros of using interactive teller machines
There are lots of reasons why an ITM could be a great option for your bank. Here are some things to think about when evaluating an ITM:
1. Reduce labor cost
Because you can spread out video tellers across ITM branches, you can hire fewer people to manage more customers. And when done correctly, the savings can really add up.
Five Star, a $500 million credit union with about 50,000 members in Georgia and Alabama, was able to move about 75% of branch transactions to a drive-thru using the ITM and after opening three new ITM branches in early 2019, at least two of those branches are among the top five branches in the entire company. The credit union was able to save $240,000 per year in labor cost savings.
Considering ITMs typically run for a couple hundred thousand dollars, Five Star could have made that money back within a few years of savings.
2. Reduce the average cost of helping a customer
This goes hand in hand with the labor cost, but because your tellers are location independent from your customers, your cost per interaction can drop substantially.
3. Reduce branch size and save real estate costs
If you open up an ITM-centric branch, you could cut your real estate costs by over half. Let’s say you still wanted to have a physical presence in a new branch. You could buy a space half the size of your current branches, put in 1-2 ITMs, and then have 1-2 people on staff inside a small office directly adjacent to the ITMs. The experience of banking with your company would change, but it could provide massive savings when expanding your bank into new locations.
4. Useful for very urban or very rural spaces
ITMs shine in situations where real estate is extremely limited or when the population you’re serving is small and spread out.
In other words, if square footage costs an insane amount somewhere like New York City, then an ITM could be a smart choice. Or if you want to serve a small town but think opening up an entire branch would be a waste of labor and money, then an ITM would also work.
They also do great in locations where a lot of transactions typically take place, such as entrepreneurship centers, hotels, malls, etc.
5. ITMs can help more non-traditional customers
Imagine trying to take care of banking needs as a night shift worker! Because ITMs operate remotely, you could expand your banking hours and serve customers who normally have to make a concerted effort to use your services.
6. They are more environmentally friendly
Fewer humans and fewer buildings mean less environmental costs. In other words, ITMs provide a more sustainable way to bank.
Cons of using interactive teller machines
1. They are expensive
Most ITMs cost hundreds of thousands of dollars, so you want to be absolutely sure your cost-saving estimates are valid. Do not rush this.
2. You’ll have to train staff or hire more virtual tellers
Keep in mind that you’ll have to train your staff on how to be a virtual teller and how to use the technology. You may also have to hire more virtual tellers if you want to expand your hours.
3. You won’t be hiring as many people
On the flip side, ITMs don’t require as many people to man. While this does present opportunities to save on labor and costs as mentioned, it also means your bank or credit union won’t have as much of a community presence and won’t be investing as much into the towns they operate in.
4. They can be a bit overkill
Yes, interactive teller machines are essentially banks in a box and can perform all sorts of cool functions, but your bank may not need one.
Between mobile banking and ATMs, most people can do everything they need to do without an ITM, and when more complicated financial decisions arise people may prefer to sit down and have a meeting with a physical person.
Look closely at your bank’s current demographics and how they use your bank before making any decisions.
The future of ITMs
The future of ITMs is arguably already here. They have a specific use and are great for niche situations, but otherwise, the current balance between ATMs, mobile banking, and in-person services is fairly efficient. We expect to see more ITMs in places that have extremely limited real estate availability and in places that don’t need an entire branch but could use a hybrid solution.
There’s also a strong argument for more robust mobile banking taking place of the current role ITMs play. Consumers can already make transfers, deposits, and requests from their phones. It’s conceivable that banks will develop video chat support in their own apps and use a combination of electronic signatures & online transfers to facilitate more complex financial needs from the comfort of a customer’s smartphone.
That being said, if the impact of COVID-19 has a significant impact on customer behavior for years to come, you could see a rise in ITMs to facilitate fewer face-to-face interactions and allow customers to fulfill their banking needs from the comfort of their vehicles.
The bottom line
Interactive teller machines can be useful, but look carefully at why you need one and make estimates on the costs it could save you.
They are not cheap investments, so the last thing you want to do is buy new technology that doesn’t really make your bottom line or customer experience better.
See how Tidal’s community bank or credit union merchant services can offer you an entirely new revenue stream.