A collection of observations, ruminations, predictions and random thoughts from Cornerstone Advisors.

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November 29, 2016 by Ryan Rackley Ryan Rackley

Are Video Teller Machines the ‘Branch of the Future?’

The lowly ATM has been sitting in the corner for the last couple of decades, quietly doing its job. It hasn’t complained, it hasn’t called in sick. It’s always hungry for deposits and happily spits out cash. Over the last few years, however, we have seen a revolution in automated teller
machine technology with the advent of deposit automation and video teller capabilities.
As banks and credit unions continually strive to find efficiency and differentiation in their branch networks, many are wondering if they should invest in video teller machines (aka interactive teller machines).

ITMs are basically ATMs with enhanced functionality, including video chat capabilities back to a centralized teller. ITMs require a significant capital investment, and investing in these machines has become a popular and controversial topic. Why are some FIs investing in ITMs and some are not? What is the return on investment? Are these machines essential to the “branch of the future?” Is there an alternative?

Video teller capabilities come in many different forms, and signing on for this new technology is far from a “no brainer” decision. To help FIs develop a business case for an investment in ITMs, here are GonzoBanker’s no B.S. pro and con considerations.


Staffing Benefits

In a typical ITM-supported environment, tellers are consolidated into one or more centralized locations and have the ability to service multiple branches. In theory, this produces a queuing/efficiency benefit, the underlying promise of many ITM vendors. In reality, the ability to realize staff savings depends on the institution’s current staffing levels, level of integration, and strategy for customer introduction to ITMs. (Will the institution have dedicated staff teaching customers how to use these new machines? Will it force customers to speak with an employee via video for potential cross-selling?) In Cornerstone’s experience, it is more common for an FI to repurpose staff to greeting, platform and sales roles than it is to realize significant net staff saves.

Consolidating tellers can provide more benefits than just staff savings. Centralizing teller staff reduces turnover ratio, attracts higher quality applicants, and affords consistent training and communication of best practices, sales goals and promotions. Centralized locations can also be strategically placed for the benefit of recruiting and retaining better talent than might be available in certain branch locations/geographic regions (e.g., rural or expensive urban markets).

Incremental Sales

There are mixed opinions on whether implementing ITMs gives an FI the ability to produce incremental sales. In fact, we have not come across any data that shows there is a significant difference in sales performance between FIs with and without ITMs. But, for the sake of this discussion, let’s explore what might make an FI believe that implementing ITMs contributes to incremental sales.

Branches today typically have high cross-sell goals. Increasing sales with ITMs doesn’t happen from just demanding that staff make more cross-sells from walk-in/call-in traffic. Instead, it originates from a couple of fundamental changes in sales strategy:

1. Repurposing part or all of the full-time equivalent (FTE) employee savings from ITMs. This allocates benefits to sales roles and can free up time for outbound sales activities (e.g., hosting financial education seminars). Additional volumes are generated by increasing the number of FTEs focused specifically on sales and aligning compensation incentives to production goals.

2. Removal of manual cash handling. This has a positive effect on back office balancing procedures. Allow branch staff (who we no longer call tellers) to focus more on providing financial advice, community involvement, and driving brand awareness than on counting and handling cash. Also, drive-thru lanes with ITMs typically provide a better customer experience than transacting and communicating through the traditional vacuum tube system.

Enabling the Transition to a Cashless Society with Efficiency

Teller cash and check transactions are on the downturn and are inversely following the growth of debit and credit cards across the United States. How long it will take for the usage of cash to bottom out in our industry is anyone’s guess, but we know the trend will continue. As branches are already being run with bare minimum staffing at today’s volumes, leveraging ITMs in a cash-declining market can be an alternative strategy to drive efficiency. Branches have already begun their transformation from cash centric to account opening and advice centric. In our recent study, The Quest for Video Teller ROI, none of the financial institutions that have implemented ITMs experienced any measurable customer runoff.

Extended Hours

Branch locations without ITMs typically require two to four employees to operate each branch for extended hours. This is a very expensive value proposition. On the flip side, by leveraging the queuing benefits of ITMs, multiple branches can stay open later (in the drive-thru or vestibule) with significantly less staff while maintaining nearly full teller functionality.

Technology Perception/Digital Transition

There is a digital perception and branch of the future connotation that goes along with ITMs. Some perceive ITMs as an essential element of the branch of the future. Others view ITMs as an intermediary step to introducing branch-centric customers to a way of transacting digitally. As transactions migrate to digital channels without ITMs, the rationale is to essentially speed up the process for branch-centric customers while providing maximum customer retention and long-term cost savings by shrinking the cost of the branch network (size or number of locations).



ITMs require significant capital investment, with total cost of ownership considerations drawing on people, process redesign, and technology resources. To reap staff savings, scale is the name of the game, and positive ROI is not a given. Producing staff savings based on reducing FTE headcount can require multiple machines and multiple locations.

Banks and credit unions have been working hard to drive efficiency in their branching strategies, pushing the incremental efficiency required for a positive ROI even further. An investment in ITMs requires hardware, software, installation, and maintenance costs, as well as the cost of training for video teller staff to operate them.

Customer Transition

A large majority of community and regional FIs differentiate themselves with outstanding personal service. ITMs change the customer experience, and resistance to change needs to be factored into this equation. Moving to video teller technology will require educating customers on how to use the machines and staffing branches appropriately to address transition periods.

ITM technology is new, and the industry is still figuring out how it will play out. Fast following banks and credit unions are learning as they go with this new technology. (See: Six Video Teller Mistakes to Avoid)

While ITMs are often viewed in isolation, they should really be used as part of a broader branch experience strategy or to solve a specific business problem like staffing. It’s important to remember, though, that an FI looking to solve a staffing issue with ITMs must realize that this particular technology is only one of numerous technology and process changes that can solve the problem.

Whether or not ITMs make sense for an FI depends on the institution’s retail/branch strategy, market opportunities, and current staffing levels. It’s a decision that warrants a much more carefully considered approach than “let’s buy one and see if it works.” It requires a business case that is part of the FI’s branch of the future strategy. It demands a broader justification than just ROI. Analyzing incremental benefits, costs, strategic alignment and customer impact to determine if ITMs make sense are key ingredients of this very high-stakes decision.


My thanks to Kaleb Seymour for his important contributions to this article.



The Quest for Video Teller ROI

In a recent study, Cornerstone Advisors uncovered the business cases and rationale behind the thinking of financial institutions that have deployed ITMs, and the operational performance, deployment issues and challenges the FIs experienced as a result of the technology.

Included in the report are performance metrics for capacity, cost and transaction ratios. Learn more


Smart Business Case Analysis = Smart Decisions

Before you buy your ITMs or invest heavily in an ATM refresh, consider a Video Teller and ATM Business Case Analysis from Cornerstone Advisors. Cornerstone can provide you with a best practices framework and methodology, and compare your data against peers and the market to produce a strategy that you can execute. Contact us today to learn more.



Filed under: Branch Sales & Service, Call Center, Information Technology, Marketing, Retail Banking, Strategy, Web & Mobile Banking

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November 17, 2016 by Emily Waite Emily Waite

Frictionless Payments Take Center Stage at Money 20/20

Money talks. Some say it’s a gas. And these days it’s drawing a growing swarm of bankers and technologists to Sin City every year to talk about its future. This year’s Money 20/20 event in Las Vegas drew a massive attendance with 11,000 individuals, 4,500 companies, tons of new technology, and a mind-blowing expanse of collective brain power. The event’s level of growth and sophistication since its inaugural event in 2012 is truly impressive.

The underlying theme my Cornerstone compadres and I picked up over the four-day event was the financial industry’s growing resolve to create “frictionless, personalized payments.” Every discussion and presentation focused on the challenges and innovations financial institutions are tasked with to create “frictionless” experiences. This theme was sparked by keynote speaker Frank Abagnale, author of best-seller “Stealing Your Life.” Abagnale talked about the paradox of our hyper-connected society today, noting, “We complain about people stealing our identity and yet we give it away.” Facebook posts, text messages, tweets, etc., never really go away, even if they’ve been “deleted.” My colleague Ryan Rackley summed it up perfectly when he referred to social media as the “new tattoo.”

While consumers and payment providers may hope for frictionless payments, the execution path will require new capabilities and deployments in fraud mitigation, cyber security, open APIs, and enhanced interoperability. The complexity of this future vision underscored the importance of partnerships between the FinTech world and financial institutions to get this vision from cool demo to reality. Some of the best discussions from Money 20/20 centered around three key megatrends:

Megatrend #1 – Retailers Want the Smart POS

Retailer perspective sessions emphasized improving the consumer’s buying experience versus the payment experience. Many of the sessions stressed the importance of understanding and addressing customers’ pain points rather than just providing them with new, shiny objects, a key theme in Walmart Director of Payments Kara Kazazean’s session. Kazazean talked about the importance of understanding what drives a desired shift in customer behavior prior to deployment. Kazazean shared the new Scan & Go app recently made available to Sam’s Club members. The app allows customers to scan items for purchase and bypass long cashier lines. Walmart eliminated a customer pain point and made the shopping experience quick and easy. Nice.

Poynt introduced its Smart Terminal, an all-in-one, handheld device that accepts payments on an open platform. The company’s marketing message is that their merchant POS devices can be as smart as consumer devices. Unfortunately, during a live demonstration, the product experienced technical difficulties and failed to accept the mobile payment, forcing the presenter to use a card to complete the transaction. How ironic is that in the journey to frictionless?

Megatrend #2 – Secure and Compliant is a Non-Negotiable

According to biometric company BioConnect, 63% of confirmed data breaches involve weak, default or stolen passwords. Because standalone biometric authentication has proven to be ineffective, BioConnect announced it is partnering with Visa to provide a multi-factor authentication solution aimed at streamlining the authentication process and phasing out static passwords. Cornerstone agrees that this deal could go a long way in helping combat cybercrime – as long as we keep in mind that current methods are not foolproof. There is still a lot of development and adaptation ahead for this effort.

We were intrigued by what regulatory technology companies NICE Actimize and Trulioo had to say about partnership opportunities available to FIs to help implement regulatory requirements. RegTech companies like NICE Actimize and Trulioo provide cloud-based platforms intended to simplify and standardize compliance processes through automated mapping of regulatory risks. Cornerstone can see how RegTech partnerships could help banks and credit unions more efficiently and effectively manage, monitor and adapt risk management functions by cutting back on manual processes and duplicated checks. However, just like CRM or business intelligence, RegTech will require strong design, process ownership and widespread adoption by employees to make any dent in reducing the growing compliance burden.

Megatrend #3 – The Search for the Next Killer App

In our never-ending search for notable innovation, we heard a lot of buzz surrounding real-time payments, P2P and the launch of Zelle, the highly anticipated “Venmo killer,” in early 2017. After Zelle announced 19 confirmed FI partners, we heard mixed reviews regarding the true value and use case of this new P2P service. We are not in a hurry to call Zelle innovative, nor do we expect to see a shift in customer behavior when Zelle begins to compete with established players. For now, this appears to be only another option for customer payment fulfillment.

Alipay, China’s “Global Lifestyle Super App,” is definitely on Cornerstone’s radar. This is not just another payment option, but a third party online payment platform with no transaction fees and integrated lifestyle management tools. Today, Chinese consumers can look up transportation schedules, make dinner reservations, receive local merchant offers, schedule doctor appointments and pay for services. Since the initial launch in 2004, Alipay has grown to 450 million users, $180 million in transactions per day, and it controls more than half of China’s online payments market. Keep your eyes on this innovator.

Douglas Feagin, head of Alipay International and SVP of Alipay’s parent company, Ant Financial, told us the company’s mission is to buy and sell globally and provide financial inclusion and customer service worldwide. With an “open philosophy,” globalization is a key component of Alipay’s plan to expand to 2 billion users worldwide in the next 10 years. Alipay is currently used by 300 international merchants, 65 financial institutions, including Visa and MasterCard, and it supports 14 major foreign currencies. Recently, it announced partnerships with First Data and Verifone. We don’t expect Alipay’s emergence into the U.S. market will be very far away.

The best things in life may be free, but for now bankers have a huge and growing focus on money – frictionless, smart, fast-moving and secure money. Hats off to Money 20/20 for helping to further the strategic conversation for everyone in the payments industry. There’s a great deal of opportunity and a ton of hard-nosed execution challenges on the horizon.


Payments revenue accounts for 25%-50% of an FI’s non-interest income

Tightening up your payments program can have a huge impact on your bottom line. Cornerstone Advisors can work with you to evaluate your cards and payments data and maximize non-income opportunities.

Visit our web site to learn more.Cornerstone-Advisors_logo


Filed under: Cards & Payments, Information Technology, Retail Banking, Risk Management, Vendor Buzz, Web & Mobile Banking

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November 1, 2016 by Wes Bjorklund Wes Bjorklund

3 Ways to Make the FFIEC CAT Work for You

Congratulations to all the financial institutions that have completed the FFIEC Cybersecurity Assessment Tool (CAT). Well done! Mission Accomplished!

So what’s next on the plate – world hunger? Cures for diseases yet to be discovered? Sending mankind beyond the stars?

Well, bankers, before you drop the mike—we should talk.

This latest and greatest addition to the regulatory family of expectations has been tacked on to an already over-crowded, sprawling McMansion with six different architectures, eight different siding finishes and a towering turret off the master bedroom. Yes, a turret. In castle-grey.

Think of this new assessment like that addition you built to accommodate the home gym your loved one promised to really, really use—this time.

We all want to please that loved one and build brownie points or make up for that time we forgot to pick the kids up from a birthday party. (Not that I’ve ever done that, mind you. It was the soccer field.) Financial institutions are oftentimes the same way—they want to do the right thing exactly as their regulators “suggest.” Regulators, meanwhile, have historically not given such specific direction and with such a prescriptive approach as they’ve done with the CAT. So what?

The “So what?” is this: my reaction is similar to what my colleague Ryan Rackley recently wrote about unsolicited vendor offers. There’s a voice saying, “Just do it, make the leap. It’ll work.” Only in my case it’s, “The addition will look fine and no one will notice that the roofs don’t match or the brick is a totally different color.”

So, before bankers run off and build another one-off, standalone, unsustainable solution using the static, basic tool the FFIEC has put out there, they should stop and consider a few things. Bankers need to take a breath before they cut out that first doorway investing money and, more importantly, that most elusive commodity: time. Poor planning or missteps here will cost more later on, not only in terms of time and money but also in the bank’s ability to effectively address today’s growing information and cyber security threats. It’s like my dad always told me around his shop, “Measure twice, cut once.”

We all know the “ounce of prevention, pound of cure” axiom to be true, whether it’s putting an addition on a house, creating a process, developing software, or managing an effective information security program. Many of us have experienced the direct relationship between the cost to correct an issue and the time that passes as that issue persists. (My thanks to Barry Boehm for first articulating this observation.)

What’s the Alternative?

Okay, we’re not building a house here but hopefully the metaphor is helping. We’re trying to meet the needs of our “loved one,” and maybe that’s our customers, our regulators or our boards. We get that this request is not currently a “requirement,” per se, but c’mon, we’ve all been in relationships where we know how things work, and what the expectations are.

So what should you do?

I’ve taken the following three-step approach to building out a comprehensive IT and security risk program before, and it works. Sure, it takes a little more time up front to understand the requirements, identify existing solutions that can be leveraged, and figure out what needs to change, but in the end, you can create a sustainable approach that requires less effort, with better results.

1. Plan and Assess Your Options. The good news is that, as usual, the regulators have given us a lot of good content with which to work and plan. The bad news is that many organizations are not good at taking time to thoroughly and thoughtfully consider the best approach. Too often, it’s “Fire, Ready, Aim.”

At this initial stage, understanding the content and how the self-assessment fits into your program and organization is critical. Can you be successful by just jumping in and executing the assessment? Sure, but you could stumble into a few pitfalls here:

  • Redundant questions that you or others in the organization are already asking that would result in the creation of another silo’d risk repository
  • The likelihood of time being wasted by business, IT and security people who are already trying to get out from under the daily demands of myriad other risk assessments but find themselves answering the same or very similar questions they feel they’ve already answered elsewhere
  • Gaps or inconsistencies in your overall risk models if you just add this layer on top of other existing risk management efforts. Oftentimes we see conflicting treatment or assessment of risks because an institution uses two different risk models, or two different groups are assessing the risk independently. Who’s right?

The biggest potential danger is putting all your eggs in one basket and thinking this new tool is the end-all, be-all solution. It isn’t. It’s only a piece of the puzzle in building and maintaining a program. Take some time to figure out how this “vision” fits into your culture, organization and program.

2. Reduce, Reuse, Recycle. Be conscientious of your surroundings and recognize that it’s a shared risk environment. Look to repurpose proven or accepted processes that have already been established. Instead of thinking of this as a shiny new solution to be built from scratch, consider whether existing processes or assessment activities can be tweaked to achieve the same result.

For example, instead of standing this CAT effort up by itself, there’s often more value in collapsing or consolidating the effort with other similar risk management processes where there’s overlap in scopes or reusable automation. Maybe you have an established asset-based or controls-based information security risk assessment process that could be combined, resulting in a more effective, efficient approach. Perhaps you have some automated workflow in place to manage those other efforts and capture documentation to support risk management decisions. There are opportunities like these in many organizations that can be tapped to streamline efforts and drive efficiencies and value instead of just adding more layers and redundancies.

3. Be a Realist. Recognize that this CAT in its current incarnation is only a single tool in your toolbox to keep threats at bay. You have to be able to articulate how this assessment, in whatever form it’s been deployed in your organization, fits into your overall information security program and the institution’s overall risk management structures. Maybe simply completing the assessment and adding it as a new section in your information security manual is enough. However, if you’re looking to move your efforts to the next level and drive efficiency and effectiveness into your practices, take some time to look around the house before putting up more walls.

Reaching the Next Level

Instead of a “cyber-only” solution, consider developing a consolidated assessment approach that looks more broadly across the bank’s risk landscape and considers your requirements across a number of areas (FFIEC, NIST, ISO, Payment Card Industry, HIPAA, Sarbanes-Oxley, Cloud Security, etc.) to create a tailored, technology and security risk framework.

Following this three-step process shows management (particularly for funding these efforts), the board and regulatory partners that you are building a comprehensive approach that will yield more complete, consistent results across the organization and require less time and fewer resources.


To raise new questions, new possibilities, to regard old problems from a new angle, requires creative imagination and marks real advance.”  –Albert Einstein, theoretical physicist, lover of music, and Nobel Prize winner (but not for what you think)

What do you want to build today?

Your Cyber or Information Security Risk Assessment efforts should be the foundation of your organization’s strategic and operational security readiness to identify, protect, detect, respond to and recover from potential security events.

How solid is your foundation?

Cornerstone Advisors can help your organization assess your program’s effectiveness across a variety of areas.

Contact us today to learn more.


Filed under: Information Technology, Risk Management

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