Article

Giving kiosks their due credit

With an emphasis on customer convenience and institutional security, credit unions are beginning to embrace kiosks as supplements - and alternatives - to traditional tellers.

February 20, 2002

When financial institutions look for ways to improve their bottom line, there are typically two roads they can take: increase charges to customers or reduce operating costs.

For credit unions, however, increasing charges is not always an option.

Unlike a traditional bank, a credit union serves a specific group of people - typically employees of a certain company or members of an organization. As such, their audience - and their profit potential - is somewhat limited. Therefore, reducing operating expenses is an appealing option to the credit union, and many credit unions are now turning to kiosks to help with that task.

"We serve specific groups of employees," said Rick Scali, vice president and kiosk division director of Real-Time Kiosks, a Norfolk, Va.-based firm that has been in business for about five years. "One of the issues we deal with in credit union land is that we don't have the greatest channels of distribution.

"A bank, as an example, can open up a branch on any street corner and service anybody that comes in," Scali continued. "Credit unions by their very nature need different types of distribution channels, and self serve technology is ideal for that, especially since many of our sponsoring companies have a second and third shift."

For credit unions, kiosks represent a growth opportunity. For the kiosk industry, credit unions represent a potential killer application. But the road to success is usually fraught with complications, and the relationship between credit unions and kiosks is no exception.

Security - Part One

Many credit union kiosks can perform the same tasks as a human teller - dispense cash, take deposits, write loan applications, distribute ATM cards and PINs, even dispense loan funds. But while customers have embraced the ATM for withdrawing funds, they have been more reluctant to trust their deposits to the automated process.

That psychological roadblock is crucial for the credit union kiosk designer; if you want the machine to become a self-contained "virtual branch," you have to make sure that the customer will be willing to make deposits through it.

For companies such as Real-Time Kiosks and Virtual Branch Technologies, which both manufacture kiosks for credit unions, the potential solution is twofold: scan the items for the customer's benefit, scan the customers for the institution's safety.

Virtual Branch Technologies's credit union kiosks have the look and feel of a traditional ATM.

"One of the issues we identified is that members will get cash out of the machine without any qualms, but they were more resistant to making deposits," Scali said. "So when we take a deposit, we take a picture of the deposited item, and include that picture on the receipt."

Scanning each item greatly reduces the incidence of empty envelopes and disputed transactions, though it means a user must feed each deposit item into a slot for processing. The average credit union member, however, deposits just 1.2 items with each transaction, according to Scali, whose company researched the viability of scanning each item before adding that feature.

Recent upgrades to Real-Time's products allow the machines to photograph both the front and back of each item, read Magnetic Ink Character Recognition (MICR) lines on checks and money orders, and endorse them. Virtual Branch president William Maloney said his company's kiosks contain duplex check scanners, MICR line readers, and currency validators, along with several other features.

"We actually drive quite a few different peripheral devices such as signature pads, card swipes, various cash and card dispensing devices," Maloney said.

Security - Part Two

Security and privacy are always big concerns whenever an institution dispenses cash or other valuables, and credit union kiosk manufacturers are turning to biometrics to help make their machinery safe to use.

Because credit unions have specific membership rolls, the databases created to store fingerprint or facial scanning information is limited to the credit union members. The biometrics software verifies the identification of members when they conduct business at the kiosk.

"We don't hide the camera - it's fairly prominent on the kiosk," Scali said. "We want the member to know that we are taking their photograph. The incidence of fraud on our systems is almost nonexistent."

"We believe very strongly in biometrics," Scali said. "Initially, some of our customers weren't that excited, but I pushed the fact that the importance of biometrics is being certain that you're dealing with the right consumer, especially if you want the device to do anything a human teller could do."

Virtual Branch is developing ultrasonic fingerprint technology. The technology is expected to be ready by early 2002.

Getting the word out

A typical Real-Time unit costs between $45,000 and $50,000; Scali said the company has sold about 60 to date. Virtual Branch kiosks cost between $20,000 and $100,000, depending upon options, and the company has about a dozen installations.

"(Sales) were slow for the first couple of years, because the average credit union didn't understand and appreciate self-serve technology," Scali said. "Over the last few years it has increased exponentially."

California's First Financial Credit Union will have ten Real-Time kiosks deployed by the spring of 2002.

While the credit union industry can not back that claim with official kiosk usage data, anecdotal evidence seems to suggest that credit unions are warming to kiosks, seeing the potential savings and increased revenue.

One credit union that has received positive feedback for its kiosks is First Financial Credit Union, a chain of 18 branches in California. The association currently has seven Real-Time kiosks deployed, with three more to follow in the next three months. First Financial senior vice president Carlton Musmann said the association purchased kiosks because of the convenience they offer customers and the potential for future profit.

"It's a new concept and people are still getting used to it. But the members that are utilizing it really enjoy using it - they complain if it's ever down," Musmann said.

Musmann estimates that just under five percent of First Financial's transactions take place through the kiosks. Next year, First Financial will run promotions to encourage users to utilize the machines. One possible promotion will involve offering lower auto loan rates for customers who initiate the transaction through the kiosk.