Banking when the teller is in a different town

So I spent three long summers working as a bank teller. It was not the most compelling job. Yes, the third of the month was always busy (that’s when Social Security checks were cut) but there were a lot of Tuesday afternoons just staring at the ceiling because there were no customers. Turns out even counting money can get boring.

Twenty-some years later, I know that staffing a teller line is a challenging problem. These systems are inherently small so the difference between having two or three tellers working can be quite signficant in terms of customer waits. Given that, I was intrigued by a Wall Street Journal article highlighting steps banks are taking to reduce the number of tellers in branches through increased automation (Banks Join the Do-It-Yourself Craze, May 14). Some of these changes seem useful if not game changing (e.g., NCR is pushing machines that let customers buy money orders). However, a credit union down in North Carolina is doing something cool.

Coastal Federal Credit Union in North Carolina last year found a way to go high-tech without sacrificing the virtues of face-to-face contact.

At Coastal’s 15 branches, customers are directed to video screens that connect to 36 tellers in a room at the credit union’s Raleigh headquarters. The tellers remotely authorize transactions, review check images and dispense cash, just as they would in person.

Willard Ross, chief retail officer for the credit union, says the bank cut costs by 40% by eliminating its branch tellers. He says customers still get personal contact and the remote tellers can make judgment calls that an automated system can’t, such as deciding whether a check can be cashed immediately.

“Branch managers don’t have to worry about manning the teller operations anymore, so they can be totally focused on the members who walk in,” Mr. Ross says. As a result, he says, product sales have nearly doubled in the branches.

The video-teller machines also can reduce a bank’s real-estate costs because they take up far less room than a whole row of teller windows, NCR’s Mr. Bailey says. They are about 20% more expensive than the average ATM, which costs about $45,000, he said.

The promotional video below describes the technology a little bit more and identifies some further advantages (e.g., it’s hard to rob a teller who is in another town).

We just finished covering queuing in the operations core class so I guess I am primed to be excited about this. It’s an excellent example of how firms can take advantage of the inherent economies of scale in service systems. I would venture that if they can cover 15 branches with 36 centralized tellers that they likely needed at least 45 decentralized tellers (i.e., three per branch) — that’s a 20% labor savings. That’s just cool!

There are, of course, some caveats to this. Given how technology has evolved since my days as teller, it is likely that there are only two kinds of transactions still happening in large volume in bank branches. First, those that are complicated or labor intensive. Imagine having a lot of small bills and coins after a school bake sale. If these machines deal with cash by having customer feed coins and bills into a machine, this would be a serious bummer to do with a remote teller.

The second set of transactions would be with technophobes. The actual transactions may be simple but the customers don’t want to do them on line or at a conventional ATM. At Coastal they don’t have to use an ATM and they get to see a smiling face but I wouldn’t be surprised if the Luddites were still unhappy with the change. There is also a question of familiarity. When it is always the same three or four people working the teller line, customers see a familiar face. When they get matched with one of several dozen people in a call center, they may not see the same teller twice in a month.