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ATM and eCommerce

Digital Payments are growing, and financial institutions have high expectations for adoption. But with usage rates stalled, is this the right time for community and regional banks to invest, or should other options be considered first?


We just finished an analysis of Mobile Wallets and P2P payments. Here’s a few key points, but read the full article for more detail.


There is wide belief among financial services executives that mobile wallets and P2P payments will shortly become basic table stakes, similar to mobile banking. According to the 2016 Debit Issuer Study, commissioned by PULSE, almost three quarters of financial institutions expect at least 15% of debit transactions will migrate to mobile in the next 5 years, and nearly half believe the migration will be in excess of 25%. They have invested accordingly: issuer adoption of mobile payments has surged and 65% of debit cards are now eligible to be loaded into mobile wallets, up from 30% in 2014.


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I had the pleasure of chairing the Branch Optimization track and speaking at the American Banker/Source Media Retail Banking 2014 conference earlier this month.  Clearly branch optimization was on the mind of participants and the room was filled to capacity. Take that, Digital Media!

Seriously, there’s not much controversy over the importance of the branch channel, but there is a lot of debate about the nature of its transformation: the number of branches, the average size, what’s inside, the type of employee, and the most effective sales and marketing process.

Our panel had an informative and spirited discussion with three different points of view from Bank of the West, Associated Bank, and Santander.

Here’s an overview of what we discussed


ATMs have evolved from simple cash machines to really represent what their acronym stands for: Automated Teller Machines. For an interesting review of some of the key trends (and some additional perspective from us), see: After over 4 decades, ATMs are still vital to the banking industry.


But with improved technology and changing customer habits (decreased use of cash, fewer branch visits) many banks are re-evaluating how ATMs fit into their overall distribution strategy. In recent weeks, Bank of America announced it was reducing its’ off-site ATM footprint, removing them from many grocery stores and shopping malls, while at the same time PNC is increasing the number of off-site ATMs. Chase is experimenting with greater self-service in their retail branches, utilizing ATM-type technology to reduce the cost of branch operations. Meanwhile, USAA and Coastal Federal are continuing their expansion of enhanced function ATMs, combining them with supplemental technology, to provide a complete customer service experience that includes document scanners, document and check printers, and video conferencing access to remote sales and service experts.


How should banks and credit unions integrate ATMs into their strategy? They are still a vital distribution point, but financial institutions need to use a sharp pencil to determine the best strategy.

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Not too long ago, banks were asking whether they really should invest in Internet banking. Now many are raising the same questions about consumer remote deposit. As my daughter would say, “I don’t get it!”


Our youngest daughter grew up in Vietnam and joined our family when she was 8 years old. She learned English quickly, but understanding idioms and some of our illogical customs remained challenging.


A few months after she joined us, we took her to summer camp along with the rest of her siblings. “It will be fun,” we told her.


She looked around.


“No air conditioning? No TV?”


“I have to share a room with 12 other girls, sleep on an upper bunk, and eat in the dining hall with 100 other people?”


“You have to pay for this?”


“I don’t get it!”


Here’s what I don’t get the reluctance of many banks to adopt consumer remote deposit capture (scanning checks or taking photos on their smartphone and transmitting them to the bank).


A few weeks ago I listened to a presentation by USAA, Chase, and others, about their Consumer RDC strategy.


USAA explained how 35% of deposits now come through remote capture. They explained how they could specifically attribute a 10% increase in total deposit growth to this channel, and how they had plans to continue to grow consumer Remote Deposit to 65% of total. Both USAA and Chase explained how fraud was lower than expected and articulated some of their fraud control techniques. They talked about how the duplicate check problem was really not a problem.


There were lots of questions – mostly about risk.


So I was thinking:


“Consumers become their own proof operators and send checks directly to you, fully imaged.”


“Fraud is lower than regular check deposits.”


“Consumers like this channel, and move their relationship to banks that offer it.”


“But you are still worried, and are holding back because you prefer to have customers take their checks to high cost branches with expensive tellers.”


“I don’t get it!”


Everyone is worried about DDA and payment revenue, but some banks have a clear roadmap for success.

If your inbox looks like mine, every day I get a new round of confusing emails:

  • “Free checking is dead, really dead”
  • “Free checking is still very viable – at least for community banks”
  • “Debit rewards? Not sustainable in the new environment”
  • “Debit rewards? You still need it, just have to revamp your program”
  • “Durbin will be the death of us – it’s the last nail in the coffin”
  • “Durbin will revised and it won’t be so bad”
  • “All of this means that customers are being driven out of the banking system, leaving us with fewer opportunities”

It’s enough to make your head spin!

But I am very encouraged.

In a few weeks I’m chairing a panel discussion at the BAI’s Payments Connect Conference – it’s called “Bankers Respond to the Industry Challenges”. As I’ve spent time talking with the panelists and discussing the solutions they are implementing, I am tremendously encouraged that there is a clear path forward for revenue improvement.

Three very different banks have agreed to participate on this panel: Comerica, Fifth Third, and BBVA Compass. Each has different target markets and different marketing strategies. Each is big enough to have explored and analyzed a wide range of issues and opportunities. Each is specific in their recommendations.

I hope you can join us. If so, please stop by and say hello. I’m expecting thoughtful but lively interaction.


I was reading the in-flight magazine on Southwest Airlines recently and came across an article titled Last Tech, a salute to the best bygone gadgets. It was stuff like typewriters (remember before computers?), payphones (who can find one?), photo film (we’ve all gone digital), and — stop the presses — checkbooks!

Who writes checks anymore? Ninety one percent of consumers have checks but they only account for 14% of payments. According to a recent Federal Reserve study, 39% of consumers expect to decrease their check writing activity in favor of other payment means, especially on-line bill payment.

In the UK, which invented what we know as the modern check in 1681, the number of checks written has declined to the point that the Payments Council has decided to completely eliminate the check clearing system in 2018. Sweden and Norway have already discontinued paper checks. We’re headed in the same direction, just not by formal mandate. In the US, the number of checks written now is only 21% of the number in 2002.

Here’s what you should be thinking about:

  • Why do you still have “checking accounts” instead of consumer and business cash management accounts? The basic consumer and business transaction account needs a new model, not just because most consumers and small businesses don’t write checks any more but because the economics have changed significantly with new regulation. Isn’t this the time to take a hard look at your consumer and business deposit products to insure they meet customer needs and will be profitable in the new environment?
  • Why do you still staff your teller lines the same way when teller activity in most branches is not sufficient to support fully dedicated tellers? Labor is our single biggest cost, and yet most banks cling to outmoded management models despite dramatic changes in the quantity and type of branch activity. Shouldn’t you be reviewing your branch staffing models, teller line automation, and branch front line skills?
  • Why do you still organize deposit operations back offices along basically the same model despite the fact that the type of activity has changed, and the skills needed to manage future payment streams are different than what was needed in the past? Shouldn’t you be re-thinking the way you manage your deposit back office?
  • Why do you still design branches around transaction activity (teller, drive-up, etc.) despite the fact that branches are changing from transaction points to sales and service centers? A few banks have started implementing new bank models with great success. Shouldn’t you be looking at this for the next branch you build, or for existing facilities you remodel?

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