Keep the teller, fire the ATM!

Narmi Staff Contributor

Despite our daily reliance on digital, life remains physical. Clothes need washing, snacks need eating, and cash needs spending. There’s no escaping the fact that the cash, whether physical or digital, eventually comes out of a bank account. When that cash is physical, it is often dispensed from an ATM, which, since its introduction over thirty years ago, has become ubiquitous.

Although the ATM has diminished the importance of some bank teller interactions, the number of bank employees has actually increased by 50,000 nationwide over the last three decades.[1] Previous fears of unemployment now appear misplaced. But a new bogeyman is again threatening banking employee jobs: the mobile banking app. Similar to previous rounds of automation, banking apps will make human bankers even more integral to the bank experience - what will be less necessary are those machines for physical cash. So fire the ATMs and hire more bank staff!

Digital spending via credit and debit cards started the decline of the usage of cash, and banking apps will only increase that trend. Today, the need for cash grounds most trips to ATMs, so as cash declines in usage, the most threatened service is not bank tellers, but the ATM itself. [2] Functionality improvements like bill payment and check deposits combined with associated services like advertising may extend the profitability of ATMs. But as these features become more commonplace on mobile, even ATMs with advanced functionality will begin to see declines in traffic.

Still, physical and digital points of consumer-bank contact (branch and mobile) are already reducing the importance of the cash machine. Year-over-year growth of mobile banking app usage is significant. [3] Notably, research does not show a dual increase in banking app and ATM usage. But digital services, from the interpretation of a consumer’s financial picture to loan approval, ultimately require more, not fewer, financial institution employees.

Mobile banking apps increase consumer interaction with their banking data - which reduces overall consumer confusion and cross-pollinates other banking services. The miniature bank-in-the-phone spurs transactions through the expansion of consumer decision-making power (and by reducing transaction costs at the same time).[4] Studies in both the developing world and the United States indicate that traditionally underserved populations as well as normal target customers grow in confidence due to mobile app usage. [5] [6] [7]

The simultaneous benefit for consumers – readily available account information with more power to avoid fees – increases activity at an institution. Although institutions may generate fewer service penalties, the net average impact (after costs) of mobile banking apps is to generate seven cents per customer per month by strengthening the customer-bank relationship. [8]

This flexibility of operation drives the service revenue increase: however, this flexibility is not due to the machine, but to the human operators. As banking apps become a major point of consumer-bank interaction, human guidance will be all the more desired. Branch employees that already perform tasks in-person will transform from on-site presences into remote consultants, able to diagnose, prescribe and monitor individual accounts. Consumers desire human advice on both day-to-day products and complex products such as mortgages and investments - this is even more true for the millennials just starting to engage in major purchasing decisions such as car loans and homes. [9]

Only with improved mobile technology will this shift occur. Only with employee retraining and resource allocation. Only with a recognition of problem and potential. Only by reaching in a pocket, by tapping a screen, will the teller be promoted and properly valued as the future of digital banking.

A Guest post by Jacob Baker.

  1. Autor, David H. " Why Are There Still So Many Jobs? The History and Future of Workplace Automation." Journal of Economic Perspectives 29; 3 (August 2015): 6.
  2. Cash remains resilient across most nations, including the United States. However, technological changes such as mobile banking apps will likely affect domestic, non-illicit, medium-to-large transactions. See: Alderman, Liz. "In Sweden, a Cash-Free Future Nears." New York Times (December 26, 2015). Jobst, Clemens; Stix, Helmut. "Assessing Recent Increases in Cash Demand." International Cash Conference 2017. Fish, Tom; Whymark, Roy. "How Has Cash Usage Evolved in Recent Decades? What Might Drive Demand in the Future?" Bank of England Quarterly Bulletin 2015; 3
  3. Liu, Jun; Abhishek, Vibhanshu; Li, Beibei "The Impact of Mobile Channel Adoption on Customer Omni-Channel Banking Behavior" SSRN. (January 10, 2017).
  4. Verissimo, Jose Manual "Enablers and Restrictors of Mobile Banking App Use: A Fuzzy Set of Qualitatitve Comparative Analysis (QCA)." Journal of Business Research 69 (May 2016): 5456-5460. ["...use and non-use of mobile banking depend[s] on multiple configurations of perceived risk, compatibility, perceived ease of use, perceived usefulness, age and income..." (5460).]
  5. Kumari, Neetu; Khanna, Jhanvi "Cashless Payment: A Behavioural Change To Economic Growth". International Journal Of Scientific Research And Education 5; 7 (July 2017).
  6. Asongu, Simplice A.; Nwachukwu, Jacinta C. "Comparative Human Development Thresholds for Absolute and Relative Pro-Poor Mobile Banking in Developing Countries." SSRN. (March 2017).
  7. Liu, Jun; Abhishek, Vibhanshu; Li, Beibei
  8. Ibid
  9. "State of Retail Banking 2016: Consumers and the Branch Experience". TimeTrade. 2016.

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Keep the teller, fire the ATM!