Should UK retail banks be banking on video?

In the battle for retail banks to reduce costs, services are becoming progressively more automated. Banks are looking to empower customers with the technology to answer their own queries about balances and bills, helped by trends such as the rise of smartphones and tablets. Banks are keen to deploy more self-service technology which enables the provision of more complex, higher value services at lower cost. Could video banking be the delivery method?

We all know that in-branch banking is expensive to provide, so retail banks are using new technology to drive down costs, diversify service provision and differentiate their offering. Video banking, most commonly provided via a video screen and camera in an ATM, enables customers to speak to bank staff in a central location while using a self-service kiosk or an ATM.

Video ATMs can provide services at lower cost, extend opening hours and downsize branch networks: a very attractive package at a time when there is still severe pressure on costs for retail banks. But other countries are far more advanced than the UK in their use of video services.

Conestoga Bank, a US retail operation, recently announced plans to install two more video ATMs at one of its branches. The video ATMs, know as personal teller machines (PTMs) are made by technology company uGenius, which was absorbed by NCR in January 2013. Conestoga Bank claims that transaction times are typically 33% faster than with an in-store bank teller and PTMs have allowed the bank to extend opening hours and carry out more transactions on weekends, with the machines available from 10:00 until 16:00 on Saturdays and Sundays.

NCR has demonstrated significant leadership in the future of video banking by acquiring uGenius, whose PTMs connect bank customers to a live, remote teller via video and audio. Conestoga Bank says that these remote tellers can complete more than 95% of typical branch transactions at lower cost of delivery.

Innovation in the UK has mainly focused on audio, rather than video services. For example, the Co-operative bank has just introduced talking ATMs that will help to serve blind and partially sighted customers. Over 400 “speaking” ATMs went live in May this year and the bank aims to deploy over 2,000 by the end of 2014. NatWest has also committed to making 80% of its 4,800 cash machines speech-enabled over the next couple of years.

Video has been successful elsewhere and the figures behind the business case seem compelling. So why is the UK lagging behind other countries? In larger countries with a less well developed branch network and more rural populations, remote video terminals can offer services in areas the branch network cannot reach. Undoubtedly there is also an R&D and capital cost, which in these straightened times is not always a popular proposition.

Research from Intellect has shown that 80% of bank IT budgets are spent on maintaining legacy systems, leaving only 20% for new projects to change how the bank operates or delivers services. But 80% of this 20% is spent on compliance-based projects, leaving only 4% of the total IT budget available for non-regulatory projects, such as video banking.

The typical technology maturity model dictates that solutions are likely to become cheaper and clear best practice implementation models will emerge as time goes on, also reducing risk. The long term cost savings are clear: a branch equipped with video ATMs can be set up for approximately half the cost of a traditional outlet, due to lower staff numbers and smaller footprint made possible by offering diverse services over video links.

Or perhaps the UK will skip video ATMs altogether and head straight to the logical next step: video banking in the home. Consumers can speak to their bank via a mobile device - laptop, tablet, smartphone - wherever they are. This is already a reality for customers of Russian Standard Bank and the Bank of Moscow, for example.

In time, the benefits of deploying video services technology have become more transparent and a future in which video services will handle routine and complex transactions at lower cost now seems much more likely. The ability to deliver a broad range of high-value financial services in branch using video is likely to boost the bottom line through better sales per transaction ratios, as well as by reducing costs. Video could be just the answer to retail banks’ post-recession challenges. Watch this space.