Blog: Death By Deposits

January 05, 2017  |  BRENDAN THORPE

High-volume, low-value transactions offer challenges, but also opportunities to retail bankers. Tackle the issue correctly, and you accomplish one of the key goals of branch transformation: cost control. As the bulk of these transactions are cash related, one obvious solution is to deploy machines that can both dispense and accept cash.

The Deposit Automation Dilemma

So-called “deposit automation” self-service terminals have been available to banks for some time and can enable a broad range of transactions to be moved away from the teller. However, they don’t solve all the problems, as they rely on the ability of the customer to identify themselves at the terminal using a card.

For retail banking customers this is generally very straightforward as they are the card holder. However, for commercial banking customers the person making the deposit generally isn’t the card holder. This issue, coupled with the need for an auditable paper trail by the person making the deposit, forces them to the teller channel. Many banks have a nickname for this type of transaction, in the UK, it’s sometimes cheekily known as “the man from Greggs.”

Greggs is a very successful UK business that turns over more than £800million annually and operates around 1,700 stores across the UK selling bakery products, snacks and drinks. Whilst it accepts cards, many customers still pay with cash due to the average transaction value being around £5. Historically this has generated a need for employees to make a large number of cash deposits into their commercial accounts.

This requirement isn’t unique. It’s an issue that faces many commercial banking customers around the globe who run retail businesses that don’t generate the kind of cash volumes that make collection by a cash-in-transit company a commercially viable proposition. In the UK, the small and medium enterprise (SME) sector accounts for £1.8 trillion in funds flow. Whilst much of this is electronic funds flow, cash still represents a significant percentage of transaction volume.

Consequently, there is a need for banks to find a solution to the challenges this transaction type presents: a sort of “death by deposits” situation in which teller time is taken up with cash intensive transactions. Whilst these visits don’t always represent a high percentage of the overall transaction volume, the effort required to process them is often significant. Enabling commercial deposit automation requires a different approach. Bankers must rethink the end-to-end journey of their commercial customers, rather than just the branch experience.

Connected Commerce for Commercial Customers

With the advent of initiatives such as the European Parliament’s revised Payment Services Directive (PSD2), banks are now being forced to look at how application program interfaces (APIs) can be used to open up the banking environment and enable new types of user interactions and business models. PSD2 effectively changes the ways in which customers could interact with their bank. There is a belief that the main beneficiaries of these initiatives would primarily be fintech challengers, but whilst this may be true there are also a broad range of other, more “traditional” tech companies that could benefit from deeper integration into the banking ecosystem. Commercial deposits represent one of those areas where traditional tech players can take advantage of these initiatives.

If you reimagine a business customer’s deposit journey through the lens of utilising a bank’s APIs to pre-stage the deposit, you can easily envision an experience that’s more seamless, both for commercial customers and for the retail banker.

Consider a commercial deposit transaction that actually begins on the retailer’s electronic point-of-sale (EPOS) system. As this system contains information about the current cash on hand, it could automatically calculate the day’s takings. This “cash up” functionality could then automatically report the takings to the retailer’s accounting systems and simultaneously pre-stage a deposit into the retailer’s bank account using an API available through a bank’s online presence or mobile app. That action could trigger an automatic SMS text with a one-time-use QR code to the appropriate staff member.

When the staff member arrived at the bank’s self-service terminal they could then present the QR code in order to make their deposit. Once the deposit was complete, the same API that was used to initiate the deposit could close it off with the customer’s EPOS and accounting systems, confirming the deposit was made and reconciling funds back to the customer’s account.

This kind of integrated, innovative approach to the customer journey has the potential to deliver huge benefits for everyone involved. While it spans multiple channels and different technical silos, it doesn’t require the kind of radical restructuring of an organisation’s infrastructure that you might imagine. Effectively, it uses APIs and process orchestration to connect the technical dots that already exist to deliver an experience that meets modern customer expectations.

From my perspective, the real challenge tends to lie in the underlying business processes and the change required within organisations to move to new, more streamlined processes. This requires the channels to work together to deliver a joined-up experience. The businesses that have a culture that fosters this capability are rapidly becoming the leaders as banking transitions from the old world to the new one.

Intrigued by the opportunity to drive connected commerce with tools you may already have? Let’s take a closer look at your organization’s current strategy and future roadmap. Contact us today.

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