Retail financial services firms continuously look for opportunities to reduce expenses. That’s been my entire over a 40-year career through good times and bad. Those efforts increased sharply in the last decade in response to the Great Recession and its lingering effects. The combination of narrowing margins and the introduction of lower-cost digital channels accelerated this strategy.
From NPR in August 2013: “Some Bank of America branches with drive-through tellers from Georgia to Texas have already closed the lanes, according to spokeswoman Tara Burke. She wouldn’t divulge exactly how many are closing. She did say the decision is not a cost-cutting move [Author’s note: Actually, it was — I was in charge, I should know.] but a response to the way people are banking. About 13 million customers bank by mobile phone and 29 million participate in online services. Among them is 19-year-old Brittney Sprague who says, ‘Not too many folks will really miss the drive-through teller because everybody uses apps. It’s all about the new technology’.”
Closing drive-up lanes, or more likely, converting them from human tellers to ATMs, was part of a comprehensive effort to “migrate” transactions from the branch teller line to lower-cost channels (ATMs, online and mobile). Bank of America wasn’t alone in these efforts. As mobile banking grew rapidly with its ability to facilitate remote check deposits, the need to visit branches for deposits dwindled.
From American Banker in September 2013: “Drive-through teller stations, once promoted as a convenience for the after-work crowd wanting to keep Bob Dylan songs playing while depositing their paychecks, are losing some of that traffic to mobile apps. As consumers increasingly use self-service channels from wherever they wish, financial institutions are reimagining their physical footprints, including drive-ups, to adjust. ‘It’s all part of a larger movement to what we call the self-service era,’ says Genie Driskill, Chief Operating Officer at Synergistics Research Corp. ‘Branches will have options for transactions inside or outside, but in a self-service mode, drive-ups are an extension of that’.”
Movement to “self-service era” was the key phrase in that last excerpt. The retail financial industry, like many other industries, have been steadily moving to self-service concepts for years.
Then came COVID-19.
Conducting Banking at a Bit More Than Arms’ Length
The pandemic hit the industry swiftly. It wasn’t that financial institution executives were more susceptible to getting the virus, it was the dramatic shutdown of non-essential businesses nationwide. The industry was classified as essential, meaning it could continue to serve their customers, but with adherence to strict restrictions in providing those services. Those restrictions included limited face-to-face human contact, masks and other personal protective equipment mandates, and social distancing.
Everyone was scared, including staff and customers. Delivering in-branch teller services became profoundly difficult, and in the minds of many people too risky regardless of the PPE they wore.
But the industry and consumer and business customers had to find ways to conduct their financial affairs, and digital channels, while handy, weren’t always an option. If only people could conduct a teller transaction remotely … yet still through human tellers. That’s where manned drive-up lanes came into the equation.
From Reuters news service in March 2020: “Banks across the United States announced plans to close branches this week, switching many to drive-through and ATM operations only, as financial institutions work to keep going despite the coronavirus and widespread closures of schools and businesses.”
I’ve searched and found no good data source for the number of manned drive-up lanes that exist, or even the percentage of branches that still have them. But from thousands of branch visits over my career, I can attest that most branches outside of dense urban areas have them, whether manned or ATM-equipped.
Back in the day, when cost-cutting was the only concern, it was simple to make the case for converting manned drive-up lanes to ATMs, or to outright shutting down some freestanding drive-ups. Closing the manned lanes led to concentrating remaining, shrinking teller volumes inside the branches where single teller lines could better be managed with reduced staffing. The hope, and my experience, has been that many of those displaced by the shutdowns of drive-ups would bite the bullet and migrate to ATMs. The rest would either go inside or go to a nearby branch with manned drive-ups.
One important point we learned, though, was that closing a drive-up lane led to more customer complaints than outright closing a branch. Customers that used drive-up lanes used them for a specific reason we found out: Not having to get out of their cars.
- Branches Still Dominate, But Banks Won’t Need as Many to Compete
- The Future of ATMs in Banking
- How People’s Changing Habits Will Impact the Future of Branch Banking
- Why Universal Bankers are Now the Only Logical Option for Branches
COVID Changes Public Desire for Alternate Channels
Now we live in a world in which conducting teller transactions without face-to-face contact is preferred over branch teller interactions. This may be the case for some time.
Should we all yank those ATM-equipped drive-up lanes and reopen them as manned teller lanes?
Probably not. Rather, I think banks and credit unions should think about upgrading those drive-up ATMs to ITMs — interactive teller machines — with teller-access capability.
In my experience of rolling out ITMs to hundreds of locations, I found that the greatest usage was in the drive-up lane. Customers loved them for the extended hours access to ATM-style service plus live teller functionality. Remember that the original benefit to customers when drive-up lanes originated was just that, extended hours access to tellers.
With drive-up ITMs, teller volume can still be managed centrally for efficiency. The incremental cost of ITMs over deposit-taking ATMs is relatively modest, too. Every firm must upgrade its machines at some time as all hardware becomes obsolete or breaks down.
So, instead of replacing or refreshing ATMs, consider upgrading for a better customer experience.
If you still operate manned drive-up lanes today, you have more flexibility than others in these challenging times. If you closed down all the manned lanes and replaced them with ATMs, you still have options.
Jon Voorhees is President and founder of BankDistributionStrategies.Com in Bellingham, Washington, specializing in banking and credit union retail strategy. Before starting his firm, he was head of Distribution Strategy and Execution for Bank of America. To connect with Jon, please contact him at [email protected]