COMMERCE NOW

Summary: 

Today, we're going to discuss when it's appropriate for FIs to implement ATM video solutions. As we all know the banking industry continues to transform and FIs have to transform along with it, but this doesn't always mean that the same solution will work for every FI. Video solutions can be tricky and may or may not be the right solution for your customers. Our panel today will discuss how you will know whether or not video is right for your environment.

Related Content:

Blog: Interactive Video Teller: Another Dimension of Self-Service

Blog: The benefits of looped Cash Cycles: A Conversation with Volksbank Albstadt

COMMERCE NOW Website

Diebold Nixdorf Website

 

Transcription:

Scott Anderson:               Hello, I'm Scott Anderson and I'm your host for this episode of COMMERCE NOW. On today's podcast we welcome Diebold Nixdorf's Chris Gill, Senior Director of Global Advisory Services, Dawn Winston, Senior Product Manager DN Banking Teller Products and, Brendan Thorpe, Senior Global Demand Lead for Banking Software.

Scott Anderson:               Today, we're going to discuss when it's appropriate for FIs to implement ATM video solutions. As well, we all know the banking industry continues to transform and FIs have to transform along with it, but [00:00:30] this doesn't always mean that the same solution will work for every FI. Video solutions can be tricky and may or may not be the right solution for your customers. Our panel today will discuss how you will know whether or not video is right for your environment so let's dive in.

Scott Anderson:               Dawn, I'd love to start with you to sort of set the stage here. Can you give us a quick overview on the video solutions that Diebold Nixdorf has brought to the table today from a product standpoint?

Dawn Winston:                 Yeah, absolutely and Diebold Nixdorf is committed to [00:01:00] offering several different video teller solutions to financial institutions, banks, and credit unions and really we want to be able to offer what makes sense to a financial institution's business model and branch concept model. So if you, as an institution, are more interested in furthering your customer or member experience and making sure that you have that personal touch or the interaction with an employee at your [00:01:30] institution, then you would be more interested in something interactive video teller.

Dawn Winston:                 And that interactive video teller, essentially, allows the teller to drive the entire transaction session with the consumer standing at a service device, with the consumer just offering input or approving transactions, and that does allow the teller to have that longer touch time with your customer or your member. So they can do things like [00:02:00] improving that customer's experience or even doing things like upselling to your customer or member.

Dawn Winston:                 And then we do offer another solution that really is more about switching your staffing model. So maybe you want to transition some of your teller staff to do other roles like selling or marketing some of your products and you're more concerned about efficiency of your financial institution, so in that scenario they're not spending as much [00:02:30] touch time processing transactions. They really are focused on doing things like cardless authentications or overrides and approvals of checks and the transaction at the consumer's end switches back into a self-service mode freeing up more time for your branch staff or your central office staff to work on other roles within your institution.

Scott Anderson:               Great stuff, thanks for sharing that. And given some of the capabilities that our portfolio offers today in the marketplace, Chris, I'd like to [00:03:00] ask you from the perspective of our advisory teams and the customers you're speaking with, what are some of the more common use cases for the deployment of video by banks and credit unions today?

Chris Gill:                             There are really three different categories of use cases that we've seen in the market.

Chris Gill:                             The biggest one is really around improving branch operational efficiency and in this case the institutions are looking to impact the staffing costs in the branch where they're servicing the drive-up, and they may have certain tellers that [00:03:30] are servicing the drive-up. Whereby replacing the drive-up lanes with ATMs with two-way video, they can impact the staffing levels in the branch and reducing the costs of operating those branches. At the same time, sometimes, there are some branches where the drive-up area is removed from the lobby area, and it creates some inefficiencies in handling branch traffic, so a video solution there can again, help with the operational efficiency [00:04:00] and require less staffing.

Chris Gill:                             We do see there are some instances where there are certain types of branches where the use case is more compelling. We've had a couple customers that are looking at in-store supermarket branches where they're eliminating the teller counter and replacing it with ATMs with two-way video. That way they can focus in those branches on opening up new accounts and interacting with people in the store and not doing transactions so that's kind of [00:04:30] one use case in this category.

Chris Gill:                             Another one would be where they have branches in smaller markets or remote markets, where the low transaction volume branches, yet they still have to maintain a certain minimum level of staffing to handle transactional activity. And in those cases again, they could really eliminate the teller role but still provide the routine transaction capabilities but with video agents instead of tellers in a branch. So for the most [00:05:00] part improving operational efficiency is really the primary business case.

Chris Gill:                             Now, I think the use case around institutions that are looking at expanding their branches into new markets or to fill gaps in their existing markets, but they're looking to do it at a lower cost. So we've had discussions with a number of organizations that the opportunity here is to build a branch where they can still provide routine transactions using video, and they [00:05:30] have a couple people in the branch that are there for customer service and opening up new accounts. So it's perceived as a way of not having to spend as much money on a new branch, but they can still provide that face-to-face service albeit over video.

Chris Gill:                             And then the last kind of use case that we've seen is around improving customer convenience and hours of operations. So some institutions have video tellers that are available until [00:06:00] let's say 7:00 PM or even 10:00 PM, that provides a competitive advantage in the market where they can provide teller service at longer hours of service. Or we've seen a couple institutions that are in markets where they are competing against institutions that are seen in stores that are offering longer hours and so their competitive response is offering video to match their competitor's hours of operation advantage.

Chris Gill:                             So in North America, I would say those are really the key use cases. Now in, [00:06:30] outside of the US, we've seen, typically in the Middle East, where they're using video primarily from an expanded transaction set point of view. So for example, the Middle East where they can provide greater withdrawal amounts in cash leveraging video rather than enabling at an ATM, so they can provide longer hours for that but provide that capability leveraging an ATM with video.

Chris Gill:                             So again, in some markets they're looking at the [00:07:00] ATM with video as an opportunity to provide additional transactions that cannot be done on a standard ATM.

Scott Anderson:               Interesting, so lots to think about for financial institutions who are trying to make some decisions around what video might look like as part of the retail banking strategy. What do you think some of the key criteria that institutions need to consider when they're contemplating video as part of their retail banking strategy?

Chris Gill:                             So I think there are really three different areas that institutions need to consider when contemplating [00:07:30] video.

Chris Gill:                             Number one, is looking at their customers and members, currently serving or in the markets that they're looking at serving. So we've done some research in this area around consumer acceptance of self-service and video and not surprisingly younger consumers tend to be more self-service oriented and so they tend to have a higher level of interest in video than older consumers okay. So looking at your existing customer [00:08:00] member base, or the markets that you're in, it's important to really look at the characteristics of those consumers and are they more open to using alternative methods to doing their transactions than other segments are, so I think that's number one.

Chris Gill:                             Secondly, is important to look at what kinds of activities are they doing, are you doing in the branches and again, to some extent, the customer mix. So are you doing fairly routine deposits and withdrawals in your drive-ups [00:08:30] or in the lobby that can be easily moved over to being done over video, or contrast, do you have a lot of business customers coming to the drive-up and they're making large deposits that involve coin, or do you have a lot of check cashing transactions at your branch where customers or members are looking for cashing checks to the penny. If that were the case then that maybe, that would probably, be less attractive as an option for a branch to deploy video.

Chris Gill:                             And then [00:09:00] I think the third thing is you need to look at branch specific factors from a location and site point of view. So for example, if you have a branch that's located on a high traffic road where there's a lot of road noise, that may not be a good candidate for video just due to some of the issues around the engagement, and the customer experience over a drive-up ATM, maybe less conducive to an area where there's a lot of noise for example. So I think it's important to look at the characteristics of [00:09:30] your existing branches as well when determining whether it's the appropriate location for video.

Scott Anderson:               Great, thanks Chris. Brendan, anything you wanted to add to that?

Brendan Thorpe:              Just to pick up on some of the points that Chris was making. One of the key things around video is making sure that users have a great customer experience when they're actually using the video solution. There's a couple of key factors that will play into that.

Brendan Thorpe:              One of the key messages Chris was making was really you've got to think about what it is that you're actually going to deliver [00:10:00] using video. Typically, it's not going to be your general transactions. It's going to be transactions where something's either gone wrong or somebody needs assistance with something. So straight away you're pushing it down into some of the lower volume transactions, some of the more difficult things.

Brendan Thorpe:              So obviously one of the key things is once you get to that point you're either frustrated because you can't move forward, or you're in a situation where you really do need help. The system needs to be responsive, so the teller needs to be available to come online. [00:10:30] So you've got to look at the type of transactions, what the volume is going to be of those transactions, how you're going to staff it to make sure that consumers aren't standing at an ATM blocking it from other people but aren't getting frustrated because it's not getting responded to quickly. But also making sure that the teller on the other end is capable of actually delivering the transaction that they're looking for.

Brendan Thorpe:              If you get that mix wrong, you're going to end up in a situation where people will try video and then will fall away. They won't use it again. So for [00:11:00] video to be successful, it's got to deliver something that you can't do with a card and a pen. Something that's a little bit unusual. It maybe at a stress situation where you've lost your wallet, and you need access to cash services quickly, and it's a great way to do it or it could be, as Chris says, drive-up ATMs where typically you may have had somebody using vacuum tubes and a glass tube but now you've got a machine there. They still get the same kind of experience and it's immediate.

Brendan Thorpe:              However, you do it have a clear vision of what it is you're trying to deliver, the transactions [00:11:30] that you're trying to deliver, and understand how you're going to staff it and make sure that customers get a good experience.

Brendan Thorpe:              I don't know if you'd add anything to that Chris?

Chris Gill:                             I think it's really important to understand typical consumer behavior and the typical consumer that maybe using video.

Chris Gill:                             So in today's environment a customer that comes to a branch, their mindset, is they're going to either park their car, walk inside, and do a transaction at a teller or they're going [00:12:00] to drive up to an ATM lane and put their transaction in a tube. So in the latter, the first case, they're expecting to walk inside the branch and so if you've got an ATM in the vestibule that's running video, but you have a teller inside, a consumer is not likely to stop at that ATM and use that for video teller when they can walk inside and use the regular teller.

Chris Gill:                             So one of the things that we've seen is if you give customers options, one of which they're already very comfortable with, and the other that they've never experienced, they're always going to default to [00:12:30] the option that they're most comfortable with. And we've seen some institutions that have deployed video in the lobby or the vestibule, but they also have full-service traditional teller services inside and that has resulted in very low transaction volume using video because they're giving customers an alternative or different options, one of which they're very comfortable using already.

Scott Anderson:               So Chris, with all of these criteria and the different options that FIs have to consider, what are some of [00:13:00] the key drivers to finding an accept rate of investment on video? Can you share some examples of what might be required to achieve an acceptable ROI?

Chris Gill:                             So there are a couple factors there. One is really around the staffing ratio for the number of video agents per video ATM. So typically, we will see 1.5 to 2 video units per video agent. Going with that kind of a ratio you need to have some cost take out on the teller side in order to balance that. So [00:13:30] quickly we have to say for every video agent you need to reduce this 1.5 to 2 teller staff in order to get the appropriate ROI.

Chris Gill:                             So the staffing ratio is very very critical into achieving the ROI. Yet, at the same time, critical in that if you don't have the right ratio you could lead to a suboptimal customer experience because the customer will be waiting much longer than desirable for a video agent to become available.

Chris Gill:                             The other key factor is really [00:14:00] the scale of deploying video terminals. So what we have found is that given the upfront investments for video, it's important to deploy video at a minimum of six to eight locations, if not more, to really get that full ROI on the solution because if not, then you're looking at a much much higher cost per transaction then you would by deploying it at multiple locations.

Scott Anderson:               Got it. Thanks so much for that. What in your opinion, Brendan or [00:14:30] Chris, are some of the characteristics of institutions that have been most successful in deploying video to date?

Brendan Thorpe:              So from my perspective the ones who've done video the best have all had a clear understanding of what it was they were trying to achieve from a customer experience perspective. They knew the transactions they were trying to deliver and they were very focused about it.

Brendan Thorpe:              I think it's also important that at the end of the day video is a multi-channel activity. It's one of those things that generally covers a whole range [00:15:00] of different channels. You can deliver video on mobile. You can deliver video on a self-service terminal. You can deliver video at kiosks in branch.

Brendan Thorpe:              However, you do it, delivering something that is purely just self-service, in isolation, and not integrated into the branch environment, which are the ones that have been really successful have done, is leading yourself down a route where you're going to basically build a lot of costs that's not going to deliver the kind of return that [00:15:30] you're looking for.

Brendan Thorpe:              Chris, I don't know what you'd add to that?

Chris Gill:                             The most successful deployments are where it's really an integral part of their strategy and achieve certain objectives and they really have defined the use case most effectively and then deployed the right configuration of video.

Chris Gill:                             I would say the other characteristics of leading institutions are they really demonstrated a high-level of execution of the video concept. So they thought through [00:16:00] the people that are working that are handling the calls. They well thought through the transaction set and the desired experience. They are measuring the right things in evaluating whether they're getting the return on investment.

Chris Gill:                             But I think, as a side note, I think what institutions really need to recognize is that most consumers have never had an interaction over video from a banking point of view. So from our experience, the imperative is on delivering a great experience [00:16:30] the first time they use the technology because if they don't have a good experience, they will not use it a second time. So all too often institutions that have rolled out video haven't executed very well and as a result they're not getting the user take up and user adoption that they're hoping for with respect to video.

Brendan Thorpe:              As Chris says, that's one of the key symptoms of poor implementations, and we've seen that in some very very large implementations in the US. [00:17:00] Where it's just been deployed for general transactions without having a clear vision of what they're actually trying to deliver beyond the different experience, and it does deliver a different experience, but you don't get the repeat usage and that's critical to making video successful.

Scott Anderson:               So with all of this in mind, and as financial institutions are grappling with do I or don't I consider video as part of my strategy, Chris, what other alternatives do we have versus investing in video [00:17:30] that might achieve similar objectives and what should they consider before going down a video path?

Chris Gill:                             Well, so I think there are a couple different options, and I'm sure Brendan can chime in after as well.

Chris Gill:                             First, is the objective really is to prove operational efficiency and reduce operating costs at the branches. Then making sure that the institution has appropriately leveraged their existing investments in ATM, online, and mobile functionality that improve customer convenience [00:18:00] and migrate routine transactions to self-service.

Chris Gill:                             I would say a majority, a high percentage, of institutions that we work with have not fully taken advantage out of investments in deposit automation on the ATM or mobile deposit or things like person-to-person payments for example. So I think the first step is to really make sure you're getting the most value out of the investments you've already made in self-service and digital channels.

Chris Gill:                             I think secondly, [00:18:30] is if you're again, looking at migrating certain activities to a lower cost channel, is looking at the functionality of your existing ATMs for example, and it maybe a better use case to increase the functionality of your existing ATMs, which could therefore move additional transactions to that channel, rather than laying in the additional costs of the video infrastructure. And to that end, we're seeing institutions that are doing core integration, [00:19:00] adding additional functionality to their ATMs, that can achieve that objective.

Chris Gill:                             And then last but not least, I would say some institutions are looking at tablet integrating where for certain kind of exception transactions like over the limit withdrawals or enhanced funds availability on a check deposit for example, that could be enabled via tablet integration. Where someone in the branch could get alerted that there's someone [00:19:30] at the ATM and wants to get a thousand dollars in cash. They can approve that transaction without requiring a customer to interact with a video agent.

Chris Gill:                             So I think there are a number of alternatives to investing in ATMs, video ATMs, that actually offer a more compelling return on investment than the video route.

Scott Anderson:               Brendan, anything to add to that?

Brendan Thorpe:              Yeah, just to pick up on a couple of points Chris made because there's some really good good ones that he made there. If you look at, let's [00:20:00] just pause video for a second. Let's look at branch.

Brendan Thorpe:              Branch, at the end of the day, irrespective whether somebody's coming in via self-service, somebody's coming in via another mechanism, the most powerful thing you can do within that environment is start to link up those systems so that they can all work and adding video to that adds another dimension to that system in terms of the ability to make sure that customers are getting service quickly, easily. They can use the channel of their choice, and they can interact with the financial institution [00:20:30] in the way that fits them best.

Brendan Thorpe:              Now, for some demographics that means going to the teller. For other demographics, that means they'll always choose self-service. Others will do everything they can through mobile. There will be a very strong place within that for some form of self-service transaction whether somebody is doing that through mobile, somebody's doing that through a traditional self-service device in the form of an ATM, where they need assistance and that assistance can be provided either by somebody walking up to them saying hey, can I help you, without [00:21:00] using a tablet, or it could be provided remotely by somebody using a video solution.

Brendan Thorpe:              One of the things that DN brings to this, and I think this is absolutely unique in the market, is that when we look at how we deliver that solution, it's delivered using the same base technology. To give you an example of this, if you were at a self-service device, and you hit a help me button and that help me button is connected into our systems, it goes into the same queuing mechanism irrespective of whether it's being directed to a tablet, because the [00:21:30] branch is open, and you're going to get assistance from somebody walking up to help you, or if it's out-of-hours, it's going to go in that same queuing mechanism and then get allocated to a video teller who can then interact with you.

Brendan Thorpe:              So all of this technology is connected and integrated into a solution that's focused on one thing and that's giving consumers a great experience within that financial institution's systems and that's really important.

Scott Anderson:               That's great. That very important point Brendan and a wonderful segue. Dawn, I wanted to sort [00:22:00] of present you with the last question. We have some fantastic perspectives and needs in this marketplace around assisted service, video in particular, so what does the future look like for video solutions within our Diebold Nixdorf Portfolio?

Dawn Winston:                 Yeah, so we are not really changing what we will be offering from a consumer standpoint so what the customer or member necessarily will be seeing. We'll still be offering both incarnations of the solution that I mentioned at [00:22:30] the top of the podcast. Either the full interaction throughout the entire session if a teller or a representative at the FI or just the video assist option where the teller or the employee comes into give overrides or do that cardless authentication.

Dawn Winston:                 What we really will be focusing on the future at Diebold Nixdorf is our, kind of our Commerce Now slogan, Beyond Omni-channel. So we want to make sure that, as [00:23:00] Brendan mentioned, if they want to start a transaction on a mobile device or start it on their online banking or what we've been mentioning so far here, start it in a self-service channel. We can easily pause a transaction or hold on to that transaction and resume it in another channel, and because we have the advantage of a common transaction processing engine, we have the infrastructure built in order to be able to easily move [00:23:30] seamlessly from one channel to another so that you can pre-stage transactions.

Dawn Winston:                 You can start out with a transaction you think is not so complex but suddenly becomes very complex, and bring in that financial institution employee, so the Teller or the Customer Service Representative, to do those assistance type functions or completely take over the transaction and complete it for your customer or your member.

Dawn Winston:                 So that's what we're focusing on now and for the future [00:24:00] is making sure that we are making that omni-channel or that multi-channel experience seamless to your end users, to your customers and members and providing a better experience because we can have that common transaction processing engine and common infrastructure on the back side connecting all of our channels together.

Scott Anderson:               That's great. Thanks so much Dawn. Really interesting, that from a Diebold Nixdorf perspective. We [00:24:30] thought long and hard about this and we've got solutions in place that aren't just single use alternatives here. That we've really thought about how we can leverage this across the infrastructure and enterprise up in FI. I do think this is a great place to wrap up and thanks again for all of you joining us today.

Scott Anderson:               To learn more about topics like this logon to dieboldnixdorf.com or click on the link in the podcast notes shown below. Until next time. Keep checking back on iTunes or however you listen to our podcasts for new topics on Commerce Now.

 

Summary:

In this podcast we discuss the utilization of self-service and teller automation technology and the implementation of recycling to drive more efficiency and to improve the overall customer and staff experience.

Resources:

Self-Service Reloaded Guide

Diebold Nixdorf Website

Blog: Rethink the ATM-Reload Your Self-Service Strategy

Webinar replay

COMMERCE NOW pocast website

Transcription:

Scott Anderson:               Hello. I am Scott Anderson, senior director of Evangelism, and I'm your host for this episode of COMMERCE NOW. On today's podcast, we welcome Diebold Nixdorf's Jim Flannery, global advisor for Banking Channel Transformation and Tim Hoover, principle product manager for System Solutions. We're together today to spend time talking about how cash automation, and in particular, recycling can have positive impacts on today's branch environment. As we all know, the cost and controls around handling cash is a major factor in branch economics. [00:00:30] Tim and Jim have joined me to discuss the utilization of self service and teller automation technology and the implementation of recycling to drive more efficiency and to improve the overall customer and staff experience. Let's kick this off. Jim, I'd like to start with you. As you spend time with financial institutions of varying size and location, what opportunities do you see to streamline the cash handling processes for both customer and staff journeys?

Jim Flannery:                     Yeah, so any cash automation is going [00:01:00] to provide tremendous upside for a bank or credit union. Something like teller automation, which has been around for quite a while, we've seen lots of customers see efficiency gains, throughput improvements not only reduce cost but also provide a better experience for the customers, shorter queues, obviously shorter wait time, so those type of things. I think it gets a little more interesting when you start talking about self service recycling.

Jim Flannery:                     In [00:01:30] the US and in Canada, we'll say it's been a little slow for the banks to adopt that, but we're finally seeing enough cash coming in where the migration of transactions from the teller line to the device, which have traditionally been on the more costly side for the banks to do, it's finally hitting that tipping point where we're seeing an opportunity to attack that CIT cost, that high cost of cash in transit, which has been a sticking point for many FIs that they want to see maybe reduce.

Scott Anderson:               [00:02:00] Excellent, thanks very much. I think when we consider what's been happening over the last I'll call it five, ten years, technology has really come a long way in this regard. Tim, perhaps you can share with us your opinions around how recycling ATMs can augment the branch transaction processing.

Tim Hoover:                       Sure, Scott, and essentially let the technology do the work. There's now, with this technology, the ability for accounting, denominating, bill fitness sorting, counterfeit [00:02:30] detection and all that can be done at high speeds like 10 notes a second through this technology. In addition, this technology is now coming on the fourth, fifth generation of product, and it's very secure, efficient and reliable.

Scott Anderson:               Now that we've got technology and Jim, as you've said, there seems to be a little bit of take up hear in the North American space in particular and certainly this has been very prevalent globally, especially if we look at some western European [00:03:00] countries. I think about what traffic we see in the retail branches and some of the segments who place some real heavy demand on branch cash processes, really small and medium business come to mind in this regard. Tim, what advantages do you see with technology such as recycling ATMs compared to how we typically manage the segment over the counter or even with teller automation?

Tim Hoover:                       Well, Scot, we've seen some surveys, recent surveys that have shown that merchants now are more willing to use this self service [00:03:30] technology for their daily or even weekly withdraw needs. They would expect and they've mentioned that there would be less waiting in lines at the branch during peak hours or Fridays. It would allow for immediate credit for their cash or check deposits and then this technology ... And for merchants, there would even be the possibility even to promote for this SMB customer segment that maybe [00:04:00] the use of technology at 24 by 7 vestibules that are let's say close proximity to their business may be in malls or outlets, those types of places.

Scott Anderson:               Interesting, so really would I think probably improve how this small business customer would perceive the financial institution as giving them a little more access to automation to allow them to handle some of those cash deposits on a more frequent basis, so that makes a ton of sense to me. Jim, assuming [00:04:30] we have this opportunity to leverage recycling systems more holistically and to drive more transactions to self service, what positive impacts do you see for staff productivity and even consumer engagement?

Jim Flannery:                     Yeah, so industry wide, we see roughly 30% of deposits are occurring at a self service channel, so for the most part, consumers have become comfortable with depositing checks either at the ATM or more recently on their mobile device, but [00:05:00] historically, cash has always been somewhat of a sticking point, getting consumers to deposit that cash for whatever reason was always more difficult. I think some of the it goes back to the envelope deposit days of ATMs, where the trust factor of not have a valid count or inventory of what was deposited was something that consumers just wouldn't part with.

Jim Flannery:                     Now with recycling and having a growing set of consumers that are okay with cash deposits, we're seeing quite a few of those traditionally [00:05:30] cash deposits that were happening at the teller line or through the drive up teller now moving to the ATM. I think that really opens up two interesting points to be made is one, fewer transactions at the teller line allows the banks to be more judicious in how they staff their teller line, so being able to take potentially a small reductions in head count, which will reduce the cost of servicing. But I think the broader point is freeing up more staff time to spend with customers, having conversations, doing [00:06:00] investigative dialogue, where they can uncover potential gaps in products that consumer may be looking for, so really using that time that they're not spending head down, counting cash as a lower value transaction, now becomes an opportunity to cross sell and really have a more productive conversation that can deepen the relationship and hopefully create more satisfied customer.

Scott Anderson:               Interesting. Just to play on that, I think one of things we probably need to consider then [00:06:30] in the branches is some good lobby leadership so that the small to medium business customers who are coming in with bulks of cash understand that the self service devices now with larger acceptance and even recycling can support them. Anything you would add to that sort of thought process? How important is it for banks to be thinking about, banks and financial institutions, around lobby leadership and directing these consumers to the right use case?

Jim Flannery:                     Yeah, I mean clearly you need to understand the needs and the expectations [00:07:00] of the different segments, so in the research that we do, what we find is that generally younger consumers with above average income are kind of target audience for more advanced self service transaction and then as you get into older segments, and to some degree, segments of more modest income, their dependence on the attended teller, primarily the channel that has that extra help is going to exist.

Jim Flannery:                     Your point on lobby leadership is spot on. Being able to identify [00:07:30] who would be a good candidate for introducing or demonstrating the self service deposit versus some consumers just aren't going to change their behavior and they're going to expect that I guess we'll call it hand holding for even a routine transaction.

Jim Flannery:                     Now I think it becomes more interesting with the small business segment because traditionally when you look at the lower end of it, it's often the principle of the business that's doing most of the banking and their time is so important because they're running a business [00:08:00] and banking is not something that they enjoy doing. And when you think about recycling and having the ability to perhaps forgo standing in line at a busy time and use that device for despot is pretty intriguing. I think it becomes even more interesting when you start looking at other things that could enhance that, whether it's cardless or one-time use pins where they can send a runner to do the deposit where they'll get some sort of notification where they don't even have to go. They can send somebody else and it can be after hours or it could be during busy [00:08:30] and you won't have that waste of time spent standing in line.

Scott Anderson:               That's a great point and I think it's important as the financial institutions think about this for some of those small and medium businesses, getting the message to those business owners, even if they aren't the ones coming into the branch is critical, so it's a marketing this would be important. As I think about some of the things that I've seen globally, I've had the opportunity to witness what I'd call cashless branches or branches where cash is completely automated [00:09:00] in parts of Europe and Asia Pacific. From both of your perspectives, what considerations do you think financial institutions need to be mindful of to ensure this success. Jim, maybe you can start off on this one.

Jim Flannery:                     Yeah, so cashless branches in the US or in North America in general, they're not as prevalent for a host of reasons, but I think if you are going to look at that as a potential path for a branch network, certainly having a hub and spoke concept where you do have full service [00:09:30] branches that fill the advanced things that consumers are looking to do, but using cashless branches to serve the more routine transactions. When we look at this for FIs as a service, what we're often looking at is the demographics of the people using that branch is a location where you have that high concentration of high self service consumers that are okay with that. They don't necessarily need that additional attention for simple things.

Jim Flannery:                     Making sure [00:10:00] that that's part of the equation, the analytics that's really going to drive the decision. I think also, at the same time, understanding if you're converting a full service branch or a traditional branch too of something of a cashless branch, deciding on the design and how the space is going to be used is going to be crucial, in particular for larger branches, where minimum going from 4,000 square feet to 1,500 square feet, so what do you do with the rest of the square footage? How do you either convert that to something [00:10:30] that has revenue generating capabilities or how do you reduce the size of that branch to reflect the role and function of that branch within the network?

Scott Anderson:               Interesting, and I think that's something obviously a lot of the western European banks have already figured out, because of the cost of real estate. North America's really trying to catch up on that I see your points of view there. Tim, what would you add to that perspective and cashless branches?

Tim Hoover:                       Well, just not only [00:11:00] the advanced planning on the demographic and the placement and in the size, but then you get into another six months of planning on just the execution, so think about the cash and transit, think about the processes associated with not only cash replenishment but the cash in transit, the withdrawal of that cash and making sure that all those processes are determined, how the balancing is going to occur, because it will be different.

Tim Hoover:                       Then even probably the bigger [00:11:30] one is just thinking about the consumer now. This will be a big change. You just don't want them to walk into a branch and see no people or just have a bunch of machines lined up and now clue what's going on. It has been helpful and we've seen in the past a greeter in a lot of cases that can talk to the consumer about, "Hey, we've changed our design. We're now self service. Anything that you could do in this branch before, you can now do through the self service. Come with me. What kind of [00:12:00] transaction would you like to do? Let me show you how you can do it."

Tim Hoover:                       That helps in supporting certain consumer transactions if required. We've also seen, and it's been helpful, branches that have been sending out in advance, they're electronic or maybe some physical mailings talking about the changes, what's going on. You just don't want to have the consumer blindsided the first time they come into that location. In add to that even, there are on screen [00:12:30] text modifications or icons that can help a consumer actually do that transaction and we've seen even some labeling, additional labeling help with the consumer.

Scott Anderson:               Interesting. I agree. I think swinging the pendulum too far too fast is probably not going to be effective and you need to make sure that the consumer is feeling comfortable, that the typical tell that they've dealt with daily or weekly is still a part of the equation. They're just maybe engaging with the consumer a little [00:13:00] differently and maybe even being a little bit more advisory versus just be transaction processing. I think that's a really interesting point. When we talk about all of this though, I think one of the big elephants in the room is going to be how do these financial institutions begin to process a road map or define a road map and a return on investment for this type of technology and solution. Jim, what are you seeing, how are you kind of guiding some of these financial institutions down that path?

Jim Flannery:                     Yeah, so the ROI and [00:13:30] the whole road map is of course extremely important for any transformation exercise that banks undertake and I think moving to something like a cashless branch is definitely a big change for an FI, so clearly being able to quantify as much as you can about the currently what's happening at that branch, what the expect ions are for how much of the volume is going to move to self service and which parts actually may move to other branches. We've often seen that when you do something extreme [00:14:00] like that, a lot of consumers will just go to the next location that has people, so you have to be a little careful making sure that the populist that's going to use that branch are the target segments that are going to embrace self service.

Jim Flannery:                     From the ROI perspective, obviously there's some pretty obvious cost saves that most FIs are expecting to see, but I think what becomes more interesting is the things that are a little bit more difficult to measure or monetize, which I think need to be part of that conversation. I think [00:14:30] a lot of FIs get too hung up on just the cold, hard numbers, when in fact there may be additional pieces that really are overall more beneficial to some degree of just that cost saving.

Jim Flannery:                     I'm talking mainly about the things that are around the consumer's acceptance and their satisfaction with the new space and also you can't understate the staff's satisfaction as well, being able to create an environment where the employees are more comfortable [00:15:00] and they thrive at their job and you can really get the most out of people who have maybe skills that are being underutilized in a more traditional branch environment.

Jim Flannery:                     I think being able to incorporate those pieces also should be part of the equation. At the end of the day the ROI has become, in our opinion, a must have. Every project that we have worked on where we have a big capital investment, the first thing people ask me, "Well, where's the ROI? Let's see the ROI." So being able to create that is definitely going to be [00:15:30] important.

Scott Anderson:               Interesting, great. Thank you for that. That's probably the one thing that a lot of FIs need to think heavily about, but it is possible. We've seen a lot of FIs globally be able to achieve this with some great success. Tim, what or technological advancement should we expect from physical touchpoints such as recycling ATMs? What's coming down the pike?

Tim Hoover:                       Well, there are a number of ones coming down the pike. Probably the first is serial number capture and [00:16:00] that essentially means on the deposited notes, picking up on the serial number and in the case that it's needed, that can help in aiding any sort of counterfeit investigations or maybe stolen notes that were deposited at a certain ATM, at a certain location, but probably the bigger once is just thinking about predictive analytics, not only from the maintenance side of saying, "Hey, I can see maybe that this one sensor needs to be [00:16:30] adjusted or needs to be changed out," but we can do more from a predictive analysis and then possibly adjust that sensor remotely or definitely then if it's something that can't be adjusted remotely, dispatch a technician in order to perform that repair.

Tim Hoover:                       Also from the predictive analytics standpoint, just that the physical tracking and showing how consumers are conducting their transactions, [00:17:00] whether that's in a daily or weekly manner, at times of day, all that can be done now and is all inherent to the technology.

Scott Anderson:               Great, so that really helps financial institutions fine tune how theses solutions can get rolled out, which I think is probably another important factor as they're thinking about this in a more holistic way, just making sure that that take up and that comfort with both consumers and the staff is there so that they endorse this. [00:17:30] Really, gentlemen, you've given us some interesting and compelling things to think about today and with that, I think this is a great place to wrap up this discussion for now. Jim and Tim, I really appreciate your points of view and sharing your thoughts with us and thanks again to all of you for joining us today.

Scott Anderson:               If you haven't already done so, please check out our self service reloaded guide and learn more by surfing to dieboldnixdorf.com/driveroi for more information. Finally, to learn more about other relevant topics like these, log onto dieboldnixdorf.com [00:18:00] or click on the link in the podcast notes shown below. Until next time, please keep checking back on iTunes or however you listen to our podcast for new topics on COMMERCE NOW.

 

Summary:

Listen in as Diebold Nixdorf's Jerry Langfitt and Carl von Sydow, discuss how retailers are empowering their customers to shop and check-out the way they want, faster and without friction.

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Transcription:

Jerry Langfitt:                    Hello, I'm Jerry Langfitt, and I'm your host for this episode of COMMERCE NOW. On today's podcast we welcome Diebold Nixdorf's Carl von Sydow, Director of Self-Service for Retail in the Americas. We will discuss how retailers are empowering their customers to shop and checkout the way they want. Faster, and without friction. Welcome, Carl, it's a pleasure to speak with you today.

Carl von Sydow:                Thank you Jerry, the same to you.

Jerry Langfitt:                    Before we get moving can you tell us a little bit about your background?

Carl von Sydow:                Yeah, well, my background is I've been working with retail for [00:00:30] 20, 25 years, and the last 15 has been very much focused around self-service. I've been working with retailers on self-service, from Australia all the way through Europe, Asia, and now I ended up in the Americas. I moved to Columbus, Ohio, last year. I'm from Europe, as you might hear on my accent, but I've been all over the world, talking serf-service. I'm really burning for that concept. I love the fact that the checkout process is something that everybody [00:01:00] is doing every day, but it's still something that evolves. It's a great challenge for the retailers to do this in a good way and meet the customer's expectations.

Jerry Langfitt:                    Okay. Well, let's dive in. I'd like to start off by talking about consumer behavior and how it impacts self-scanning. There seems to be a lot of journeys being done at grocery stores now. I can do curbside pickup, I can do delivery, I can do self-scanning. Why do I see an explosion of different ways to shop?

Carl von Sydow:                Well, [00:01:30] I always like to put myself in the shoes of the customer or the shopper and look at the customer journey. I'm really happy that we are starting at that point as well. We are not talking products the first thing we do, we're talking about customer journeys, and what makes a customer journey attractive for a customer. If a retailer can meet that then the customers will come to their stores. They will go where they can have their best shopping experience. For me, self-service in general is [00:02:00] of course a very attractive customer journey, and there are many different versions of self-service in customer journeys. Depending on which retail vertical you're in you have different pros and cons for different solutions, but the topic for today, hand scanning, for me, within grocery, it's the ideal customer journey. From a customer perspective, to start with, but also from a retailer's perspective.

Jerry Langfitt:                    Let's describe it real quick, just to make sure, since I've just experienced it recently [00:02:30] at a local grocery store. Let's just quickly, for the audience, what is hand scanning?

Carl von Sydow:                The concept is that the customer enters the store and at the point where you enter the store the customer will take a device in a bracket in the entrance, and there are two options there. You could have a loyalty-based solution, where you swipe your loyalty card or identify yourself somehow, and you will get a dedicated device with your name on it, basically. It says, "Hi Carl, [00:03:00] welcome to this store." Or you have a different solution where you can pick any device, and you're anonymous when you go through this customer journey. I prefer the first one, of course. There are many benefits with a loyalty-based solution. But you get this handheld device provided by the retailer. You typically could have a bracket on your cart where you can put this device, so you don't have to carry it around when you're shopping.

Carl von Sydow:                On that device you will have a big screen, [00:03:30] like on a smartphone, and on that screen you will have what we call a virtual receipt. On that virtual receipt you will see every product that you're shopping. You have an article description and a price and you have a summary and everything. What that means is that the customer will have full control of the transaction. The customer will always see and be aware of how much of my budget have I spent right now, with the products that I have in my cart or in my basket? As you go shopping you pick one item [00:04:00] from a shelf, you scan it with this device, and you put it in your bag. When you have done shopping you go to a pay station. That pay station could be a standalone pay station or you could also go to a normal checkout and pay, but what you do then, depending on the solution, you scan a barcode at the end, or just put this device that you have been carrying around, you put that device back in the bracket on the wall, and then the system [00:04:30] automatically will recognize you and your transaction, and you will pay at the pay station and leave.

Jerry Langfitt:                    Now, that seems pretty interesting, because I know that when I'm shopping I rarely keep track in my head what I've put into my cart. This really does provide the consumer information that directly affects their purchase. Do they buy more? Do they buy less? What do we see in the industry?

Carl von Sydow:                Well, across Europe, hand scanning is very a known concept. It's difficult almost [00:05:00] to find a retailer in Europe that do not have hand scanning as an option. There have been a lot of different studies made in Europe about hand scanning. There are a couple of significant messages in these reports, one of them being that the average value of a transaction in hand scanning is between 10 and 15% higher than a normal basket in a normal, manned checkout lane. We see the same [00:05:30] trend in hospitality, where we have kiosks nowadays where you can go and order your hamburger. Also in hospitality, with self-service and kiosks, where you have also full control of your transaction, you can do all the different up-sale ... modify your burger to whatever you want. We see a higher increase in hospitality, between 15 and 20%, actually, on the average transaction value. [00:06:00] Empower the customer with the transaction to feel in control, that will increase the transaction.

Jerry Langfitt:                    It really seems like it, because I know if I'm shopping with my wife and we're putting stuff in the basket we're usually surprised at the end, going, "Oh my god it costs this much," but if we had a running tally I'd be more apt to go just over. It does give myself, just knowing the information, I think I would probably [00:06:30] buy more as well, because now I'm fully aware as I'm going through this. It can affect my journey probably to the betterment of myself, and the retailer.

Carl von Sydow:                That's one of the great benefits with hand scanning is that you're in full control of your spending. You know exactly ... if you have a budget, you can follow it. With hand scanning I can go on forever talking about this, this is one of my favorite solutions for self-service. There are two other main benefits, one very important one being that [00:07:00] you only touch ... whatever you buy, you only touch the item once. That's when you take it down from the shelf and scan it and put it in your bag. If you go through the store in a normal way, to a manned checkout, if you count the number of times anyone, someone, touch your items, it'll be anything from three to four times. You will put it in your bag and you will put it on the lead-in belt at the checkout, then the cashier will scan it, and then you will have to bag it or someone will have to bag it. At least four times, [00:07:30] compared to one time when you do hand scanning.

Carl von Sydow:                The other benefit of that is of course ... and if you are a trained user in hand scanning you know all this ... so if you do, as you pack your bag, so you can have the heavy items first, like the milk packages or whatever, and then you put the produce at the end on the top of your bags. You can plan your bagging process yourself, instead of feeling very rushed at the end at the checkout, or have someone else [00:08:00] bag your stuff for you and the eggs are broken when you get home. It's another benefit.

Carl von Sydow:                The second big one is that the whole payment phase of a shopping journey is eliminated to like a minute, because the only thing you do when you checkout in hand scanning is that you pay for your transaction. You don't scan any items, or you don't do anything really, you just go to a pay station and you pay with cash or with card. That [00:08:30] typically is less than a minute. Overall, hand scanning is by far the fastest customer journey through a store, independent of number of articles, I would say. If you buy five or 50 it's still the fastest.

Jerry Langfitt:                    Now, doesn't this give us an opportunity for either promotion or personalization if I'm using a device and a loyalty program?

Carl von Sydow:                If you have a loyalty-based hand scanning solution all options are [00:09:00] available for you. To push advertising to the individual user based on shopping behavior, or previous shopping behavior, or if you scan a particular item and then you have a sale, buy two pay for one, you can push that immediately to this device. You have immediate possibility to push for up-sale, or you can have offers based on shopping experience or previous shopping [00:09:30] behavior.

Jerry Langfitt:                    I did see that one, and my experience was it was if you buy four of a particular item or a brand of item, and it showed on the device and said, "Okay, you have one of four, if you buy three more," and when I hit those next three the discount automatically engaged and I was able to get that. That just seems like it's pretty powerful from the grocery store, and the consumer products goods, to be able to push things.

Carl von Sydow:                That's a good point, Jerry, because ... I shop with hand scanning. That's my preferred solution. I don't keep [00:10:00] track on all the offers in the store. I'm not that kind of person. When I scan something, I just take a quick look at the display and see if the price was okay. Then, as you said, if they have an offer for the product it will come up on the display. You have bought one, if you buy a second one you will have this discount. Then, yeah, well, I'll buy another one. Without even thinking about it I just bought an item extra because I have this opportunity you told me [00:10:30] on the display. If I would go shopping in a normal way I would never done that. I would never know it.

Jerry Langfitt:                    I would see the discount maybe at some point, but the instant gratification you do get going oh, I'll get that, and then suddenly I have four tubes of toothpaste.

Carl von Sydow:                And everybody has been at the point of checkout and then the cashier tells you that, well, if you buy another of these you will get a discount. Well, at that point, the shopping journey is ended. I don't want to break that and go and fetch another bottle of [00:11:00] Coke or whatever it is. Then it's too late. It has to happen during the shopping journey. Not at the end.

Jerry Langfitt:                    And the coupons they give you afterwards I rarely use, because I don't remember to bring them, but the fact that I have it instantly I am more apt to, well, if I get this then I'll get four more. Let's talk about implementation for a second. Europe is doing it way better, or at least it's implemented more. What is a retailer have to consider when they're doing it here?

Carl von Sydow:                Yeah, and longer. [00:11:30] As with everything it's a learning experience. Hand scanning, the first installations, I'm sure it's like 10 years ago or something. The first versions were not as good as they are today, of course. There were some learnings over the first few years that the retailers and the solution providers in Europe have taken into consideration and implemented now in the solutions that are available today. It has taken a few years to come [00:12:00] to the point where we are today, and today the solution is very mature. It works, it has been on the market for 10 years, thousands of stores in Europe are using hand scanning, and they know how to implement it. It's very important ... human beings in general are a little bit reluctant to change behavior, so if you add a new shopping journey as an alternative you have to hold the customer's hand through the [00:12:30] first few times. Otherwise, the customers will not try it. You'll always go with what you are comfortable with.

Jerry Langfitt:                    Right, what you know.

Carl von Sydow:                What you know. That's very-

Jerry Langfitt:                    It's certainly not about just installing tech, you really need to think this through.

Carl von Sydow:                ... You have to think this through, and explain to the customer why it's so good, also, for the customer. The customer is not ... like self-service always often hear that you're doing the [00:13:00] job of the cashier and you don't get anything back for it. That's very wrong. As I said, if you use hand scanning, there are a lot of benefits for you as a customer or a shopper by using this system. You have to understand them and someone has to hold your hand through the first journeys, so educating the customer how to work through the first times is very important.

Carl von Sydow:                One challenge with self-scanning, or self-checkouts in general, but [00:13:30] particularly for self-scanning, is how you manage produce, where you price the item based on weight. In a traditional self-checkout you have this weighing scale at the point of the checkout, and you pick your bananas from the icon on the screen and then you pay for it. With hand scanning, you have to move that part of that process to the produce area. You have to have a weighing scale somewhere in the produce area so the customer can do that at the produce area. Scan [00:14:00] the item, get the barcode, and then get the right price on the barcode.

Carl von Sydow:                I have seen several different attempts here in the US to solve this. Funnily enough, I don't know if they have ever seen how it works elsewhere, because some of the solutions here are very complicated. They are not intuitive, more contra-intuitive some, even. If you have an obstacle like that the customer next time will avoid to go [00:14:30] shopping with hand scanning. If it's too difficult to understand or too difficult to use I won't use it.

Jerry Langfitt:                    Yeah, first couple times, and someone's just going to wave off and never do it again.

Carl von Sydow:                Then you're done. So it's critical that you implement this from a point where you see ... you have to take away all the pain points during the customer journey and make it as easy as possible for the customer to do these things.

Jerry Langfitt:                    Now, doesn't staff really come into it? Making sure that when you're going to do a new technology, [00:15:00] again, you don't just drop a box into a store, you really have to, one, pilot it with the staff because they're going to be the bridge for the consumer. The consumer's going to go to them first. We should train them quite a bit, should we not?

Carl von Sydow:                The staff has to be like super-users. They have to know this in and out. They have to recognize and know where the usual pain points are for hand scanning. When they see someone struggling [00:15:30] at their weighing scale at the produce area they have to be very quick in helping that customer to find her way. Or, if you have ... when you scan your item you can easily do a mistake and scan the same item twice. Then you have to take one of them away from the virtual receipt. That has to be easy as well. Or, if you scan an item and then realize, "I wanted to buy that one instead," so it has to be easy for [00:16:00] the customer. For a cashier this is normal operations, to take items away from a receipt, but here we ask the customer to do this. That has to be really easy, so the system and the staff has to help the customer understand how do I do this? Because these are common things that will happen when you go shopping with hand scanning. You will scan the same barcode twice by mistake. You will scan an item and you want to buy another one instead. You will [00:16:30] do that. You have to know how to manage to do that yourself, without feeling awkward or having no one to ask.

Jerry Langfitt:                    Right. Internally, you probably need to do a frequently asked questions and make sure all the staff really understands, and be engaging and enthusiastic about it. It really needs to be that kind of implementation instead of just ... it's not just about integration and installation, it's about adoption.

Carl von Sydow:                It's about adoption, and then at the end, also a very critical part for the staff is ... we haven't talked about shrink, [00:17:00] but that always comes up when we talk about hand scanning. A lot of retailers are scared about shrink, and if you implement hand scanning it's like the customers would just walk out through the door with the trolleys or the carts full with products and not paying for them. First of all, that is a rumor, it's not fact. The studies that has been made, that I referred to earlier, shows exactly the same risk for shrinkage with hand scanning as with any self-checkout or self-service [00:17:30] solution. So you don't have a higher risk of shrinkage if you have traditional basket-to-bag self-checkout with a security scale, or if you have hand scanning.

Carl von Sydow:                If you implement it in the right way, train your staff, have random checks, et cetera, in the system, that monitors what's going on. There are, like in our platform that we have, we have self-learning algorithms that are continuously analyzing the behavior, in the background, of course. How the shopping [00:18:00] process pans out. How many items do you scan after one another? How many items do you take out from a receipt, or put back on the receipt? There are patterns there that could send an alarm that something is not really going as it usually does, or that the shopping journey takes too long or something like that. There are a lot of well-established mechanisms for managing the shrink also for hand scanning. The critical here is the staff. The staff [00:18:30] has to know how to operate and how to use this, and how to explain to the customer why they sometimes have to check if something looks wrong.

Jerry Langfitt:                    You almost have to consider, along with a consumer's journey, a staff journey.

Carl von Sydow:                Absolutely.

Jerry Langfitt:                    Like the staff also is going along with the consumer to help them adapt and help them from a customer-service standpoint.

Carl von Sydow:                Yeah, absolutely. In some of the stores where you have a very high usage rate ... and I'm talking like 50% of the customers using [00:19:00] hand scanning ... you can easily see that most of the people that you see that usually were sitting behind a manned lane, a cashier, they are walking around in the store, helping customers with the hand-scanning devices. Helping them when they have done a mistake or stuff like that. They have moved the staff from sitting down in a checkout to walking around helping customers. It's very interesting. If you have a high usage rate that's what you have to do, and that's increase or improve the customer journey as well, because [00:19:30] you have staff available wherever you are if you have a question or a problem.

Jerry Langfitt:                    I do like these new journeys that they're doing. I just recently tried it and I found the same thing. Suddenly I'm not in line waiting for my items to be scanned, and I was just interacting at the store level and that's it. Walk in, I grabbed a device, and then I started scanning everything. I loved the tally and I loved getting the discounts. I thought that was really, really cool. I think this is going to really take [00:20:00] over in America. How does a retailer who wants to implement this ... adoption is one of the hardest things to get people to do. What are some of the techniques or items or methodologies a retailer could implement to help with adoption?

Carl von Sydow:                Well, first of all, when you introduce something new, of course you have to promote it somehow. There are a lot of different ways to do that. One way is to do it visually. Again, some of the installations, the pilots that I've seen with hand [00:20:30] scanning here in the US, have been not so visual. In my local store it took me a while to even notice that they had a small rack with brackets for hand-scanning devices at the entrance. It was like nine or 12 hand-scanning devices. They were right in the middle of all the other advertising at the entrance that they had. What you can see if you go to a store that has done this in a proper way, [00:21:00] you have like a wall of devices. It's visual, you cannot fail to recognize that, all right, in this store they have introduced a new solution. It's right there at the entrance, you can see all these devices on this wall.

Carl von Sydow:                The other thing, bags. As I said earlier, the whole idea with hand scanning is that you ... opposite to what you do normally ... you put your item directly in the bag. You have to have bags at the start of the customer journey. [00:21:30] In a normal journey you have it at the end, right, at the checkout. You have to not only have the brackets there with all the devices, you have to have some shelves and stuff with all the different bag options that you might have in your store. Paper bags, or plastic bags, or bring your own bag of course, that's easy, but if you have bags you have to have them at the entrance. It has to be visual as well, so the customer realize, well, I don't only take the device, I will take the bag and bag my stuff as I [00:22:00] start my customer journey. That's very important.

Carl von Sydow:                I've also seen some other initial promotions where customers have been offered discount for the first 10 journeys, or for a period of time, a week or two, then you will have a discount. Or, if you try this, you will have a free of this product when you leave, or something like that. You have to make it fun, you have to make some marketing activities around it to get customers interested [00:22:30] to take the step to actually try a new solution.

Jerry Langfitt:                    One more thing on shrink. You had mentioned that there's two ways you can implement this system, with a loyalty program where I have a card and I have to sign in and then get the device, and with anonymous where I can just grab any device. Wouldn't one be better over the other from a shrink perspective?

Carl von Sydow:                Definitely, very much so. If you use this anonymous system it's exactly that. It's anonymous. The retailer have no idea if you're a good-behaving [00:23:00] customer or a bad-behaving customer. You will be exposed to the same random checks every time, independent who you are or how you behave. If you have a loyalty-based system ... when you log on at the entrance, as I mentioned before, typically it will say on the screen, "Hello, Carl, welcome to this store." I will know that the retailer knows I'm here. I will be inclined to behave, just by the fact that they know I'm here. I am an honest person, I want to do [00:23:30] everything right. If I do that, the systems that are available on the market, definitely ours, is built like ... if you are behaving you will not be exposed to random checks as often as someone that misbehaves. If you're a good customer you will go through that store more often than not without any random checks or anything.

Jerry Langfitt:                    Okay, so let's just do a quick comparison. Typical checkout, I'm in line, basket-to-bag, compared to [00:24:00] this hand scanning. What are some of the benefits that a consumer is getting by taking the hand-scanning journey over just filling a basket and going to a manned till?

Carl von Sydow:                It's a good question, Jerry, because I don't see traditional self-checkouts, the basket-to-bag with a security scale, or hand scanning, as being in competition with each other. They coexist, because they have different purposes. [00:24:30] Let me explain. First of all, a basket-to-bag, traditional self-checkout, you have a security scale. The size of that security scale can be different, of course. You have a small or a big scale. Typically, basket-to-bag is exactly that. It's supposed to be a basket of items, and then you bag it. It's a limited number of items, perhaps 10, 15 items, ideally, for a basket-to-bag. You can have a larger [00:25:00] basket, or several baskets, or a cart, and go to a basket-to-bag self-checkout, but that process is quite cumbersome, especially on the weighing scale, the security scale. It's very easy to have unintentional blocks because the security system will tell you to put the item on the weighing scale and you have already done that. The more items the higher the mountain that you build on the weighing scale, the more items you put there, it will just be more complex. Typically, the basket-to-bag system [00:25:30] is for smaller carts or baskets.

Carl von Sydow:                Hand scanning, on the other hand, is independent. You can have 150 items. You bag them as you shop, and then you don't touch the product anymore. You can have as many or as few, it doesn't matter. At the point of checkout, when you go paying, you can have two items or 200. The paying process is exactly the same, you just pay and leave. From a customer perspective hand scanning is the only self-service solution that offers [00:26:00] a self-service solution for large carts, large number of items. That's one thing. Conveniently so.

Carl von Sydow:                The other thing is that you have this built-in security in the basket-to-bag, with a security scale, because at the point ... that's open for anybody. A self-checkout, basket-to-bag, anybody can go there and go shopping. You have to have this security feature with the weighing scale to control the shrink and to control that process. If you have a loyalty-based hand-scanning [00:26:30] program you don't need that, because the security is sort of integrated in the platform already. You are a known customer, you're a loyal customer, we trust you. You can go shop here, and you can leave.

Carl von Sydow:                Those two systems can coexist, so in some stores where you have a high adoption rate of hand scanning you still find a few basket-to-bag self-checkouts, because there are customers visiting, perhaps, from abroad, or from another state. [00:27:00] They don't want to have the loyalty card. They don't have that loyalty card. But your bulk of customers, your loyal customers, they can use hand scanning.

Jerry Langfitt:                    It seems like, again, the way we started multiple journeys, you really [inaudible 00:27:13] journeys for different people and different types of journeys. I have one item I need to grab real quick, I have five to 10 items, I have 50 to 75 items. You really want to look at all the ones and find the purpose-built device or solution [00:27:30] that helps the consumer in their journey that they want. Again, empowering them to make their own decisions.

Carl von Sydow:                Starting with the customer journey, what different customers do you have in your store? Find different self-service options for your customers. It's not one-system-fits-all, you have to have the ... the customers are more or less expecting options. Another option that we haven't talked about is when you bring your own device, your own smartphone. That's also an option of course. [00:28:00] You don't need to have a store-provided device. You can use an app, the same application that you have on the hand-scanning device basically, but with your own phone.

Carl von Sydow:                There are some pros and cons between these two. If you just go and do an app, shop as you go, that's pretty easy. It's ideal for other verticals, perhaps outside grocery where you go shop specialty goods or stuff like that. That could work, you don't have [00:28:30] that many items. In a grocery store, as I said before, if you have a loyalty-based program with integrated security algorithms, self-learning algorithms and stuff like that, you don't really have that in an app, as you go. You just scan and go. There are limited functionalities in the standard shop-and-go app.

Carl von Sydow:                What you also can have is, like we have in our platform, you could have the full hand scanning application running on your [00:29:00] mobile phone as well, with all the security features. There's this option as well, but from a hardware perspective there are also pros and cons. The handheld device provided by the retailer is purpose-built for hand scanning. It's easy to hold, like a pistol grip. You have brackets for a holder on the cart, you can just put it there, you don't have to carry it around. The reader is a high-performing scanner [00:29:30] reader on the handheld device. The camera on your smartphone is not as good, it's not reading as fast. The ergonomy of holding your smartphone, scanning, it's not as easy as just holding this purpose-built device.

Carl von Sydow:                Another thing, of course, everybody knows, I do, I call my wife for recipes, or, "Should I buy this or that?" I always use my phone when I go shopping, I can't take all the decisions myself. That's just [00:30:00] how I am. So I'm calling home, and if I'm using my phone at the same time, I'm calling someone or doing something else, it just makes no sense to me. It makes it cumbersome, and then if the battery runs out or if I drop my phone because I have to scan all these items, I don't want to risk it. But for a short customer journey, a few items, then use your phone, it's easy. Fast in and a fast out. But if I would go shop a proper basket [00:30:30] or a cart full of items I always opt for the store-provided device. It's much easier.

Jerry Langfitt:                    I agree with you, because I know I will either FaceTime my wife or take pictures of the items and say, "Was this what you wanted?" I am constantly in communication with her so I don't get it wrong. I need my phone.

Carl von Sydow:                What we have seen also in the countries where hand scanning has been established for quite a while, of course they have added this option of bring-your-own-device to those stores as well. That has been in place [00:31:00] for several years, and the adoption rate for bring-your-own-device is very, very, very low. Just for the reasons I just explained. They are less than 3%. It seems that customers used to using hand scanning, they still opt for the provided device by the retailer, they don't use their own phone for this.

Jerry Langfitt:                    There's a benefit to having a phone that does it all, but I still contend there's a benefit [00:31:30] to having a purpose-built design device. It usually gives a better experience and a more reliable experience.

Carl von Sydow:                Yes, I agree. 100%.

Jerry Langfitt:                    I think this is a great place to wrap up. Thanks again, Carl, for joining us today. To learn more about retail topics like these log on to dieboldnixdorf.com, or click on the link in the podcast show notes.

Speaker 3:                           Until next time, please keep checking back on iTunes, or however you listen to podcasts, for new topics on COMMERCE NOW.

 

Summary:

In this episode of COMMERCE NOW, we are joined by Steve Gotz of Silicon Foundry, and we discuss how banks are increasingly creating new environments and structures to pursue innovative ideas and build new capabilities.  We explore one specific kind of innovation structure: the Venture Studio (also known as a Company Builder).

Resources:

Silicon Foundry

LinkedIn: Steve Gotz

Twitter: @stevegotz

Blog:

The Rise of the Venture Studio

Transcription:

Amy Lombardo:                Hello again to our listeners. This is Amy Lombardo, your host for this episode of Commerce now. Today I am joined once again by Steve Gotz, of Silicon Foundry, who is a known expert at helping organizations navigate the complex world.

Amy Lombardo:                So today we're going to discuss how banks continue to increase and create new environments and structures to pursue innovative ideas and build new capabilities.

Amy Lombardo:                So Steve, welcome back to COMMERCE NOW.

Steve Gotz:                        Hey thanks Amy, excited to be here.

Amy Lombardo:                Great. So it's been couple months here since we spoke last. So what have you been up to here lately?

Steve Gotz:                        So, just quick refresher for everybody, my background. I spent a long time launching new ventures for corporations. I've done that as an investor, an entrepreneur, university researcher, and a corporate executive. And most recently I was co-founder and COO of Pivotus Ventures, which was a venture studio I created with Ray Davis at Umpqua Bank. And coincidentally was acquired by Kony recently.

Steve Gotz:                        Currently a partner at Silicon Foundry, where I advise large corporations on their new venture strategies. In that role that we're talking about some of the ideas today.

Amy Lombardo:                Got it. Okay. So in our last podcast we focused more on transformation strategies. We gave examples, both from banks and even other industries on when they kind of when they hit that wall, that roadblock, and how they partnered with new and other types of organizations [00:01:30] to think about what's next.

Steve Gotz:                        Yeah.

Amy Lombardo:                So let's shift our conversation here and talk about what an organization knows they need to transform. Kind of this idea of migrating to a new business model, a new environment, and really the intent of Venture Studios.

Amy Lombardo:                So maybe we can start with discussing the evolution of this idea of like the Accelerator Business Model.

Steve Gotz:                        I think Accelerators is an interesting place to start. So Accelerators, as we know them [00:02:00] today, have been around for about a decade. And they were started during this rich period of famense, right? So it was 2005, a couple years after the dot com bubble. And in many ways, the Accelerators that started back then, and that was Y Combinator, Techstars, would be great examples, they laid the foundation of what's to come today, right?

Steve Gotz:                        And Y Combinator recognized that there were some economies of scale to be had by launching start-ups in a different way. And the Accelerator Model [00:02:30] is young teams, lots of bets, and a little bit of money. And when you do that well, you get really interesting companies.

Steve Gotz:                        And that's what we've had for the last decade but I think what we're seeing now, is things are starting to change. Technology is starting to change. Corporate strategy is starting to change, which is why now we're starting now to talk about the rise of Venture Studio. Which is a new forum that organizations are using to build new things.

Amy Lombardo:                Mm-hmm (affirmative). So does the Accelerator Business Model, does it kind of [00:03:00] compliment the Crowd Storming Idea?

Steve Gotz:                        Yeah. So, Accelerators as they started a decade ago, really about bringing young teams together to pursue big opportunities. And at that point if you think about it, right after the dot com burst there was a lot of opportunities so there was a lot of opportunities that the infrastructure had been laid to build things in a cost-effective way. So companies are using Accelerators as part of their innovation strategies.

Steve Gotz:                        Now what's happened in the last decade is [00:03:30] a lot of that low-hanging fruit has gone away. The ability to launch a business to scale quickly. The dynamics are slightly different in the current day and age. Because startups need data, they need distribution, they need access to capital. So what we're seeing is that traditional Accelerator Model evolved into the Studio Model. And Studios are different in a couple new ways that we can talk about them but we're entering this period of change when it comes to innovation strategies. And the Studio is just one manifestation [00:04:00] of the change we're seeing.

Amy Lombardo:                So talk to me a little bit about this change. Dive into that for me and just kind of talk to me about why and how.

Steve Gotz:                        So I think, in Silicon Valley, the era of "Move Fast and Break Things," is over. I think what we're starting to see are more diverse teams, in a broader sense, gender, age, background. I think there's a recognition that launching new ventures requires a diverse skillset. And it needs new kinds [00:04:30] of partnerships.

Steve Gotz:                        Launching a start-up by itself as an Accelerator doesn't work as efficiently as it could. Launching a new start-up in collaboration with a corporate that gives you data, that gives you distribution, that helps you access customers. That's really powerful.

Steve Gotz:                        So what we're seeing is more and more start-ups. More and more entrepreneurial teams and Venture Studio is coming together, launching new ventures in collaboration with corporates. And that's a really interesting dynamic that we're starting to [00:05:00] observe.

Amy Lombardo:                So is it still in these high-tech areas like Silicon Valley? Or where is the Venture Studios? Where are you having the most luck?

Steve Gotz:                        Hmm. So this is what's really interesting, right? So Accelerators largely, when they started, were concentrated in Silicon Valley, right? Y Combinator, in the Valley, Techstars in Colorado. What we're seeing with Studios is a dispersion, right? We're seeing Venture Studios crop up [00:05:30] across the country, across the globe. And oftentimes they're locating themselves close to large corporations.

Steve Gotz:                        So, High Alpha, one Venture Studio, and they're located in the Midwest. Primarily because the companies that they're building new ventures with are in the Midwest as well. There's another studio in Seattle called Pioneer Square Labs and they're up there and they're looking at really interesting consumer ventures, direct consumer ventures.

Steve Gotz:                        [00:06:00] So I think you're seeing the capabilities moving to the most natural place. And that may not be Silicon Valley. That may be somewhere else across the globe.

Amy Lombardo:                So even though these corporations might be in these major metropolitan areas, is the talent there as well? Or are these innovators being found then all over the world based on what the need there is?

Steve Gotz:                        Yeah, so, it's across [00:06:30] the world, right?

Amy Lombardo:                Okay.

Steve Gotz:                        It's where is the need?

Amy Lombardo:                Right.

Steve Gotz:                        And it's launching ventures as close to the need as possible, right?

Steve Gotz:                        So a good example would be Heidelberg Cement. So, Heidelberg is one of the World's largest cement companies. They have operations in virtually every continent. And they're launching a Venture Studio and what they're doing is really smart. They're building new ventures in country.

Steve Gotz:                        So the problems that you have with cement distribution, say, in Latin America and Brazil, [00:07:00] are fundamentally different than some of the challenges you have in a place like California. So it's natural to take your best people and put them at the edge. Put them close to those problems and say, "solve these problems and do it different ways."

Amy Lombardo:                Right. So clearly I know nothing about cement, so I can't even think of the next question.

Steve Gotz:                        Nor do I.

Steve Gotz:                        But think about this, right. Because there's a lot of similarities between the cement business and the banking business. [00:07:30] Right?

Amy Lombardo:                Oh both are important, here we go. Let's get what you're going to say here.

Steve Gotz:                        So look. These are both largely commodity businesses, and they're easily swappable, right? You could get a bank account from Wells Fargo, B of A, or any one of the 7,000 or 8,000 banks in America. And largely the product is the product. What can you do with that?

Steve Gotz:                        You can innovate around that experience. That's what Heidelberg is doing and that's what most banks are doing today. They're innovating around the experience. [00:08:00] And to innovate around the experience you need to be close to your customers, right?

Steve Gotz:                        So creating a banking experience, or a cement experience, in Brasil, is fundamentally different than the kind of banking, or cement experience you want to create in California, right? Did that work?

Amy Lombardo:                Wow, wow. Okay. I'm a believer. Because if you were going to go down some path of like brick and motor cement shops closing, I was going to be like, "we're going to be [crosstalk 00:08:28] now because we're not even [inaudible 00:08:33] here."

Steve Gotz:                        [00:08:30] And this is why I think banking executives can learn a lot by expanding the aperture and looking outside of the industry for best practices. And it just so happens that what I'm setting is in cement, but we also see interesting things happening in food, interesting things happening in agriculture, right?

Steve Gotz:                        So I think there's more that we can learn like breaking down some of the silence and sharing ideas.

Amy Lombardo:                Okay so let's go to some examples. [00:09:00] Let's jump ahead there.

Steve Gotz:                        Hmm.

Amy Lombardo:                You know for people unsure of our business model is, we're working with banks and retailers, can you give me any specific examples of Venture Studios working with banks and retailers?

Steve Gotz:                        Yep. Yeah so there's a couple of really interesting examples. So, yeah, one of the ones you know, springs to the top of my mind is what BBVA has done with Dennison. So, three years ago BBVA hired an entrepreneur and said, "we want to build a new business."

Steve Gotz:                        They didn't tell them [00:09:30] where he should build a business, they just gave him the free reign to do that. And fast forward three years, and what we have today is Dennison. Which is global bank for expats. So in three minutes or less, as an expat, I can open up a local currency account of one in 20 countries. And if you think about what Dennison has done is they've innovated the customer experience. And that allows them to do really interesting things with global remittances, global payments, currency transfers.

Steve Gotz:                        So [00:10:00] a really interesting example of a big, incumbent corporation, like BBVA, saying, we're going to create new ventures, we're going to put structures in place to allow us to build things that probably wouldn't be possible inside of the normal organizational structures. So that's BBVA.

Steve Gotz:                        Standard Chartered Bank is doing something similar in Hong Kong with their digital bank there. They just recently received their digital banking license from the regulator, so that's an interesting experiment.

Steve Gotz:                        [00:10:30] In the UK, RBS has done really interesting things with S&Me, which is their small business lending platform. So there's a lot of examples and I think what's at the center of all of these examples is corporations coming together with partners to launch new things.

Steve Gotz:                        And I think the opportunity for dVault and dVaults customers is to come together and say, "how do we create new experiences, right? How do we take a few bits of the interesting capabilities that dVault has, sprinkle [00:11:00] in a few bits of the interesting relationships that your banking clients have, to create a new kind of customer experience? That delivers value."

Amy Lombardo:                Right and you know we think it's always about the touchpoints that a consumer has within a day. And if you think about just financial transactions, it isn't just this one-to-one, I'm going to a bank, I'm taking out cash, I'm depositing checks. Whatever it might be.

Amy Lombardo:                It's that you touch [00:11:30] transactions in so many different sets through a day, so how is it that bank can complement that.

Steve Gotz:                        Yes.

Amy Lombardo:                And provide you with a seamless experience. And those examples that you gave are spot on to that. I love the one about the expat because that could be something that's so laborious, challenging for a consumer, but the bank is adding value there.

Steve Gotz:                        Yeah, absolutely. Right. And if we step back a little bit and kind [00:12:00] of think about what's happening here, it's the replatformification of the bank, right? We're creating new ways for the bank to be consumed by customers.

Amy Lombardo:                Right.

Steve Gotz:                        At a fundamental level, fluctuation doesn't matter for the customer. The customer doesn't really care if you're using distribute ledger or cryptocurrencies to clear the transactions on the back end. They care about what's the experience. And are you making my life easier.

Steve Gotz:                        And I think Dennison's a really good example of solving a very complex problem [00:12:30] in an elegant way.

Amy Lombardo:                Exactly. Can I get an immediate access to cash? Can I get an immediate access or, you know, what I need to live my life, right?

Steve Gotz:                        Yeah. Yeah. And what's really... What I find interesting about Dennison is everybody talks about the unbundling of the bank, right? And transfer-wise, it's often one of those perfect examples that people cite, that you've basically decoupled international payments of remittances from the bank.

Steve Gotz:                        [00:13:00] What we're starting to see with Dennison is a replatformification, we're rebundling the bank in new ways that the consumer can then consume.

Amy Lombardo:                Got you. Touching on that, unbundling, almost like a macro, [inaudible 00:13:14] talked about it so much in our business models.

Steve Gotz:                        Yeah. I think this is a good/. it's good area for you guys.

Amy Lombardo:                Okay, so let's say, I'm Mr. Banking Executive and I'm sitting here, and I'm scratching my head saying, "gosh, I [00:13:30] don't know where I need to breakthrough and transform my business. I'm stuck," and I go to you, Steve, or you know the partners that you work with.

Amy Lombardo:                How do they begin this process?

Steve Gotz:                        So I think there's a couple of points I'd like to make. And so I think the first one is so a general observation, and this isn't restricted to the banking industry, but corporations in general, have a hard time knowing what they have and knowing what the opportunities are. And that's not because [00:14:00] they're deficient, it's just the nature of human biases. Right?

Amy Lombardo:                Mm-hmm (affirmative).

Steve Gotz:                        When you work at the same place, in the same industry, for a long time, you start to see things in a certain way. The way you break out of those biases is to bring in people with new perspective. Bring in organizations with new perspective.

Steve Gotz:                        So I think the first place to start is increase the aperture of your conversations, right? Don't spend time with your peers. Spend time with organizations and executives [00:14:30] that are different from you, right?

Steve Gotz:                        So we spoke about cement and banking, there's a lot that can be learned there. So the first thing I would encourage executives and your listeners to do is increase the aperture. Look beyond banking for opportunities to be innovative. Look what's happening in the retail space. Look what's happening in the food and beverages space. Because I think there are things to be learned there. So that's the first thing.

Amy Lombardo:                Right.

Steve Gotz:                        The second point I'd make in terms of [00:15:00] how to get started is really related to where does innovation live within the corporation? So there was an interesting study a couple years ago where they looked at risk among banks. And what they found was, after a bank appoints a Chief Of Risk Officer, the organization tends to take more risks. And the observation there is, when a job becomes somebody's [00:15:30] function, somebody's role, responsibility now lives with that person. Right? So we now have a Chief Risk Officer, so they're going to manage all of the risk so the organization tends to adopt slightly riskier behaviors.

Steve Gotz:                        Now, where this is interesting is with innovation because innovation is everybody's responsibility. Including the CEO. So I think an important take away from this is everybody from the top down and bottom up in the organization [00:16:00] is responsible for doing new things.

Steve Gotz:                        Now the nature and scope of what those innovative things may change, may look different, but everybody needs to have a hand in how do we think about doing new things and creating new experiences. Particularly the CEO and the board. Especially when it comes to new things that are potentially really big and disruptive.

Amy Lombardo:                I love that thought. So, I'm taking away from this, look outside your industry and everyone is an innovator.

Steve Gotz:                        [00:16:30] Yeah, exactly. Exactly. Innovators just don't live in Silicon Valley.

Amy Lombardo:                Right.

Steve Gotz:                        They live everywhere. Encourage them.

Amy Lombardo:                Right. I think this is a good place to wrap up the discussion. Steve, it's a pleasure to have you on and join us on Commerce Now.

Steve Gotz:                        Thanks Amy.

Amy Lombardo:                And thank our listeners for joining.

Amy Lombardo:                So if you've got questions, feel free to reach out to Steve. Either via LinkedIn or via Twitter at @SteveGotz. Keep checking in on iTunes or however you listen to your podcasts for new topics [00:17:00] on COMMERCE NOW.

Summary: In this special episode of COMMERCE NOW, we team up with Pymnts.com's Karen Webster and Diebold Nixdorf's Uli Seeman and discuss convenience stores (C-stores) and how consumers who only ever pause for gas, and never even set foot inside the store, are a major lost opportunity for additional sales. 

Content: 
Pymnts.com Feature Article:
Moving C-Stores from a Fuel-Plus to a Plus Fuel Model

Blog: Three Ways to Improve Loyalty in Fuel and Convenience  

Transcription:

 

Speaker 1:                           Some convenient stores are great when it comes to innovative experiences. But according to Diebold Nixdorf's head of service station and C-stores, the majority of them aren't. In this payment's original podcast, he tells Karen Webster that while the independent operators that dominate the industry want to innovate into the digital age, they are held back by the lack of off-the-shelf products that make that transition possible.

Karen Webster:                [00:00:30] Uli, thanks so much for making the time to be with me today. I'm excited to have our conversation about innovation in a very exciting space in retail, the convenience store. Thanks again for making the time.

Uli Seeman:                        You're welcome. Looking forward to it.

Karen Webster:                Okay. So let's take a trip down memory lane here, and talk about when convenience [00:01:00] stores first hit the scene. So actually two dates of note 1913, way long time ago when in Pittsburgh, there was a gas station, the Gulf gas station, which became the first gas station to sell food, so that technically checks the box. But from the standpoint of convenience stores that I think many people regard as the C-store experience, that was actually in 1927, when in Dallas, [00:01:30] the Southland Corporation, now 7-11, opened a store, small format store, to sell bread and milk and other things that consumers needed to buy, but couldn't buy because grocery stores had very different hours back in 1927. They weren't open on Sundays and closed very early.

Karen Webster:                So the name, convenience stores, were open longer hours and seven [00:02:00] days a week to provide that convenience. So here we are today, and the environment's different. So there a lot of places that are open lots of different times, seven days a week, for consumers to buy things that were once only available to them at these smaller format stores.

Karen Webster:                And I guess my question to you, Uli, to start things off is, how do you think convenience stores have evolved to keep pace with that change?

Uli Seeman:                        My view to it, [00:02:30] truly, yeah. You mentioned that they started very, very early, providing convenience, providing not only fuel to their customers, but past the implementation of paying at the pump, which is a kind of self-service, they lost a little bit of pace and did stop leveraging innovations and leveraging IT for the advantage. So yes. They are open in many cases 24 by seven, but it's still [00:03:00] the old-fashioned format: forecourt is selling gas, you can pay there, you cannot purchase anything from in store at the forecourt, you have to walk inside and you do your purchases.

Uli Seeman:                        No support of anything. Lately they are starting implementing mobile payments and loyalty schemes, and some kind of advanced technology but it's still far behind the rest of the retail industry.

Karen Webster:                Yeah I would agree with you, and there are certainly some chains [00:03:30] that have done a good job of trying to integrate that experience and use mobile technology, to do that, and encourage through things like coffee and other convenience items, the loyalty and repeat purchasing by consumers. But why has this wave of innovation left this format behind? Is it that they got comfortable with being [00:04:00] convenient? Because people were stopping for fuel, and therefore they had an opportunity to convert some of the people into consumers in the store, and they didn't think they needed to do any more? Why stuck in the past?

Uli Seeman:                        I believe, we have a few very, very good examples of advanced C-stores,  like Bucky's to name a few -

Karen Webster:                Yep.

Uli Seeman:                        They have plenty of more. They are really advanced, [00:04:30] they provide complete different user experience, than the store on the corner. I believe one of the key reasons they are all large enough to have capabilities to implement these newer services. Because, in many cases, these larger chains are using IT environments, IT solutions, which are coming out of, more out of the retail world than out of the C-store world - where the focus is only to the forecourt, or [00:05:00] mainly to the forecourt and very specific solutions have been installed. So these more advanced ones, they have higher sophisticated solutions, and with tremendous effort in many cases of professional services and customization, they can provide the services they have at the moment, which are exceptional.

Uli Seeman:                        They provide kiosks, they provide order terminals, but they are customized and limited to their chains, and [00:05:30] the adoption into the other piece of the industry is quite difficult. Although keeping in mind that about 50 to 60 percent of the C-stores, gas stations, you have are owned by single owner.

Karen Webster:                Wow.

Uli Seeman:                        So they don't have an IT company, or IT capabilities like the ones I mentioned before, these larger chains. For them it's very, very tricky, to get into such advanced technology.

Karen Webster:                So, how are they [00:06:00] able to do that? Because yes, I agree with you that the large chains have embraced technology - mobile apps, and are doing lots of things to engage consumers and to habituate that experience. Not only when people stop to fill up, but for purely the convenience of being able to pop in and pick up things, including now better food than what used to be the case back in the 1970's. But the 50 [00:06:30] percent of those who aren't that fortunate, how are they able to keep up and compete? What kind of technology should they be thinking about? Or are they thinking about?

Uli Seeman:                        First of all, to take a little comment on what you said healthier food, food in general - so all of them have the challenge, that they need to find compensation for the declining sale in tobacco. And in some areas which are the margin carriers, for these stores.  So they are trying one way or the other to come up with food, with healthy food, with prepared food, in order to maximize their business. So, now looking on the implementation side, on the solutions side, the focus is for them to find providers with more box solutions. Means where the implementation effort to adopt it to that particular owner or, [00:07:30] small chain is very, very limited and where they can do even where there are low capabilities of IT management.

Uli Seeman:                        And where they can do an adjustment in order make it, to customize their solution and have a look and feel for their particular store. On the other side, the IT, that solution provider, they are slowly following that trend, but many are coming out of the larger retail environment, larger retail customer scene, so they're [00:08:00] used to have a model, a business model, which is based more on professional services than on solution sales. So this gap is slowly getting closed, but it's very slow. That's why you don't find any implementations, many self check-outs, or kiosks in this smaller store format today.

Karen Webster:                To the point about margins, and the considerations for making these investments. I mean I think we all know that, margins on fuel purchases are quite thin. And so the [00:08:30] opportunity, is to drive people from the forecourt into the store to make higher margin purchases. On top of that there are obviously the labor cost associated with staffing these stores. So there is a lot of appeal, you would think just based on the numbers, for a self service environment. I think it could perhaps even help some of the brand imagery of some of these stores, that need to signal that there are [00:09:00] new innovations awaiting inside.

Karen Webster:                But is there such a thing as a turnkey self solution, for these independently operated players who have the most to lose frankly? Because people will stop to get gas but that's about it?

Uli Seeman:                        Slowly evolves in this direction. So coming from this big implementation into, like I mentioned before about solutions. Some of the providers [00:09:30] are looking into this, there are some first solutions in the market which are focusing truly to a low cost implementation, in order to enable them. Like you said, you're absolutely right the challenge ahead at the moment is the wage increase. In many cases everybody's discussing this fifteen dollar wages - in many cases it's already there, if you see the signs we are hiring, an attendant is making already in some metropolitan areas thirteen dollars and more, an hour.

Uli Seeman:                        [00:10:00] So they have to overcome this hurdle, and new technologies are providing from my perspective, quite sophisticated solutions in order to lower implementation costs, and in order to give them a high flexibility - although, in regards of that business format yeah? One is selling burgers, the next one is selling pizzas, so even that kind of adaption needs to be addressed on a very simple way, to give them the opportunity [00:10:30] to basically buy this kind of solutions off the shelf. And yeah, my perspective is yes, it's moving in that direction, although if you see now in other areas - in other food areas for example - McDonald's is big time -

Karen Webster:                Yep.

Uli Seeman:                        Emerging, self ordering kiosks systems. And this is driving the industry, from my perspective in the absolute right direction. And it's also showing some good opportunities if you look in food, in quick service restaurants, what kind of basket size increases [00:11:00] they recognize by using kiosk systems. Having not a human being in front of you, asking you if you want to super size something, is really driving the basket size. Which is coming back then, to a benefit for the convenience stores as well, and it's returning the investment into this equipment way faster than they anticipated at the moment.

Uli Seeman:                        On the other side, obviously you need to check the store format. Does it really have the capability to provide the option to implement something like kiosks and self check-outs. Not every [00:11:30] store will have that - that size, that format that clientele, which will accept these kinds of new services and touch points.

Karen Webster:                So looking at, the broad landscape of C-stores, not just the smaller format guys, but the large chains as they think about competing with...not just other fuel operators, but grocery stores, and the smaller format stores like we're seeing pop up from Amazon and [00:12:00] others; are they looking to other retail categories for inspiration on how to engage with customers? Where are they looking for models, if you will, to bring into their environment?

Uli Seeman:                        They truly, they do look into other formats. And they have to look into other formats. If you go to groceries or home improvement or fast food, they all implemented one way or the other, self check-outs [00:12:30] or kind of, kiosk services. And what they also try to do is to have one platform for all their different touch points to their clients, so that it feels convenient to use them and you don't need to adapt yourself to the different user interfaces, touch points. That's how we call them here.

Uli Seeman:                        On the other side, that's exactly the area today's convenience store owners are looking into as a reference. They finally, [00:13:00] from my perspective, recognized they have to move in a more modern, more adapted world. Otherwise, they will have a significant issue to attract the younger population. If I talk to my kids, to their kids, what is getting you into a convenience store? Well it's not only the light anymore, it's over some kind of, following the term 'convenient'. When I go in there I don't want to sit in queue, and wait to pay my [00:13:30] candy bar - I want to have the best possible service. The kids are used to go, to a Starbucks for example and pre order a coffee. So how can I transfer that format into a convenience store? That's what the convenience store owner also looking for. You can see that, if you talk to them, yeah Diebold Nixdorf's, you'll see there is a demand, there's really a need and they want to be more innovators.

Karen Webster:                It's interesting what used to drive me as a kid into convenience stores were the Slurpee's. From 7 -11. I mean it [00:14:00] was very product driven! Not so much convenience driven but, you know, I think we laugh about this but...you are seeing, where convenience stores are trying to parley convenience plus their own type of product hook to bring consumers in - whether that's coffee, or other food items, I think you're starting to see that kind of affinity and loyalty being [00:14:30] introduced into these formats, or perhaps re - introduced.

Uli Seeman:                        Yes, absolutely. And what - we have here a little term, inside of our company; it was in the past fuel, then it became fuel plus - as you mentioned very very early in the conversation here - it was early in the 1900s already, but now it's plus fuel. So you go there, because hopefully, in future, you create a kind of destination to make people go in there. One of my most favorite examples [00:15:00] and best examples, is if you come to Texas or it's going now in the states around here, is Bucky's. They created more or less a destination for people to come; not only because of their clean bathrooms, but also it's more a shopping experience if you go in there for food and other items, than only the gas.

Karen Webster:                Interesting.

Uli Seeman:                        And I truly believe and see that the trend in this direction is going. [00:15:30] You provide special food in order to drive your customers to your C-store and fill up the car.

Karen Webster:                Yeah.

Uli Seeman:                        In the other way around, you have to go because the demand is there to fill up the car, and this is the next convenience store.

Karen Webster:                Yeah that's interesting.

Uli Seeman:                        Yeah I believe that is the trend we will see, in the upcoming years as well. And maybe there will be a little bit of consolidation as well, because like I said the very small format owner - they're [00:16:00] maybe not capable to follow that trend, but time will prove, yeah. You don't see it yet.

Karen Webster:                Yep. What is the impact, Uli, do you think of mobile in driving this change, and perhaps putting pressure on C-stores large or small to rethink delivery and this plus fuel mantra that you've identified as the [00:16:30] future?

Uli Seeman:                        I see mobile as an opportunity to be honest. Because, at this point many of them have to invest a lot of effort into upgrades, to follow the rules, the EMV compliance -

Karen Webster:                Right.

Uli Seeman:                        The EMV PCI 5 compliancy. So all around payment. Mobile in the future, will probably give them the opportunity to slowly migrate rather to mobile payments, than to payment [00:17:00] at the pump. And mobile will also give the opportunity if you are in the app, to embed functionality to pre order or order items out of the store. And maybe then, self check-out is the bridge into that - where you either have a kind of same format application running on your mobile, and you can complete your transaction. Because you can pick up stuff at that device, or [00:17:30] you can make a final check out or final payment at that device. So the whole journey is a little bit easier and it's more like you used to do at a normal retail environment; where you may pre order already on your mobile app, certain items, and you go in the store to pick them up only, and not to select them anymore.

Karen Webster:                Yeah, I mean it's interesting how all these technologies are obviously very complimentary - but getting back to the origin of the category, [00:18:00] which is convenience, and technology can provide that experience in terms of self service check-out capabilities, mobile through pre order, and staging fuel purchases at the pump. And certainly replicating the curbside pickup, and all the different things that one experiences today in other retail formats. So it'll be interesting to watch that evolution.

Uli Seeman:                        [00:18:30] Yes I agree. And it will evolve eventually into such a direction. You made, by the way, a comment about purchasing at the pump. At this point, there are very few suppliers supporting these kinds of functionalities.

Karen Webster:                Right.

Uli Seeman:                        I recognize it's slowly going into such a direction, in some states you can already buy for example a lottery ticket together with your purchase of gas. [00:19:00] But overall, that implementation that for example you start a transaction during - you fill your car, and then you go ahead within that transaction and order your coffee, your dairy's, whatever from in store. It's more an exception, than a standard functionality and feature. With the new world, having hopefully - not hopefully, we will have android devices and so forth, in the forecourt. And a combination [00:19:30] of mobile payment like you mentioned before, there will be way more flexibility and functionality provided for consumers, in order to have more convenience in a convenience store.

Uli Seeman:                        And I believe although that will drive eventually more traffic from the forecourt into the store. Today, more than half, more than 70 percent of [inaudible 00:19:52] I remember, are just coming on site to fill the car.

Karen Webster:                Right.

Uli Seeman:                        They're not going in store.

Karen Webster:                Right. Yeah.

Uli Seeman:                        It's not a very high level.

Karen Webster:                [00:20:00] Yeah no, it's not. And I think you make a good point which is - there are things that have to change, in order to open the tab if you will, for the purchase of fuel, and adding on to that purchase things that may be desired in the store itself. But that certainly is convenient and I think you can imagine lots of innovators thinking about ways to make that experience that much [00:20:30] tighter. Especially, I know the things that you guys are thinking about with combining self service and technology and mobile payments, to make that experience that much better for the consumer - and certainly margin enhancing for the operator.

Uli Seeman:                        Absolutely. We are trying to address exactly that. The increasing cost of labor, the availability of labor -

Karen Webster:                Right.

Uli Seeman:                        In some cases you can even pay fifteen bucks and more, you don't get anybody, because it's not the most attractive industry.

Karen Webster:                Right.

Uli Seeman:                        So [00:21:00] to overcome all these hurdles, and attract the stores for the people at the end of the day, let them have a very positive customer experience. Rather than staying in queues, and making it complicated to do your purchase in these kinds of store formats. So yeah, that's absolutely our focus.

Karen Webster:                Excellent. Well Uli, it was really nice to chat with you. I was happy to recall my experience as part of this discussion of buying Slurpee's [00:21:30] at 7-11, that was kind of a throwback, to my youthful days! But it's an interesting category and it's certainly exciting to see innovation unfolding before our very eyes in a format that we've taken for granted for many many years, and is now really among the forefront of opportunities for innovation. I appreciate your perspective and thanks for your insight.

Uli Seeman:                        [00:22:00] Thank you. Looking forward to the next one.

Karen Webster:                Yes, you and me both. Bye bye now.

Uli Seeman:                        Bye.

 

 

Summary:

Devon Watson and Thomas Karakalos discuss emerging trends in retail and banking services.

Resources:

Blog: Services for a Connected World

Diebold Nixdorf AllConnectSM Services Transforms Bankdata IT Strategy

Diebold Nixdorf Website: www.dieboldnixdorf.com

Podcast site: www.commercenowpodcast.com

Transcription:

Amy Lombardo:                           00:00                    
This is Commerce Now.

Devon Watson:                 00:14                     My name's Devon Watson, chief marketing officer at Diebold Nixdorf. I'm joined this week by Thomas Karakalos, who's our head of the services business in Asia Pacific. So Thomas, why don't you give us a quick background. Who you are, what you do out here. Fantastic to have you on the show.

Tom Karakalos:                 00:30                     Thank you, good to be here. So I've been with Diebold Nixdorf for the last three years. So prior to the integration with Diebold, heading the managed services business for Asia Pacific.

Devon Watson:                 00:39                     Okay.

Tom Karakalos:                 00:39                     My history, my background is deep in the systems integration room. So, heavy in tier one, systems integrators ... did a decade there, then moved into more niche kind of data storage security.

Devon Watson:                 00:50                     Okay.

Tom Karakalos:                 00:51                     Working in a global role, driving engagement, driving sales, driving project management. From there, a little entrepreneurial blood in the system.

Devon Watson:                 00:58                     Fantastic.

Tom Karakalos:                 00:59                     So then moved out, did my own thing. Still having in the background, but then it got to the point where I said, "Okay, next challenge." The next challenge was, Diebold was transitioning at the right time. Jump in really help move this ship towards services.

Devon Watson:                 01:11                     Fantastic, fantastic.

Tom Karakalos:                 01:12                     Yeah. So the focus is all about managed services, yeah.

Devon Watson:                 01:14                     Great and that's a perfect segway. And I love the fact that you have an entrepreneurial background because, as I look at how banks and retailers are going to have to navigate all this change that's happening around them, you need some entrepreneurial blood there. Because we're solving new problems, we don't even know sometimes what the next problem's going to be and how to kind of navigate all these forces.

Devon Watson:                 01:32                     So talk to us a little about what you're seeing is kind of the emerging trends in the services business in managed services and how our customers, in Asia Pacific in particular, are kind of looking at the partners, like us, that they have to help drive their business.

Devon Watson:                 01:48                     What is it they're trying to get out of this general shift towards services?

Tom Karakalos:                 01:51                     Well, as we know the whole industry is transitioning. It's transforming at the moment. So an organization, be it either in the financial industry or a retailer, is really thinking about, "What is core to my business?" There are so many moving parts, there are so many technologies and input points that they're interacting with their consumers, that they really have to take a seat of, "Okay, I cannot do everything, I cannot be everything to all men. I need to really focus on what is my core business and I need to trust partners that can come in and support."

Tom Karakalos:                 02:16                     So, there is a tendency and an increased tendency towards outsourcing, that's something that we're seeing heavily in the region. We're seeing it on two sides, we're seeing organizations that have never ever outsourced anything that are actually saying, "You know what, I've finally realized, take the whole thing because it really isn't part of my core business." And we're also seeing a lot of organizations come together as consortiums and think, "How can we drive the investment that we've already put into either solution or product or technology," to bring high utilization, a better card holder experience for their people.

Tom Karakalos:                 02:46                     So that situation is opening a lot of conversations with us because, from a managed services perspective, when we come in and give them a business outcome, that's exactly what they're looking for. So, they're great conversations what we're having.

Devon Watson:                 02:57                     Absolutely, absolutely. Obviously, that storyline around focusing on your core competency and then taking the things that are ancillary to that and pushing them over into the partnership landscape, right to those subject matter experts, like ourselves, that can take that on. It brings a lot of operational efficiency of course, but one of the things that I think is particularly interesting, and I'd like to have you add some color to this, is the agility that that brings, right? So in particular, one of the things that I know we're working with customers around the world on, is things like branch and store lifecycle management, total implementation services, things like that. And to me that's also the cost story and it's a lot more of an agility story. So, maybe shed some color on that.

Tom Karakalos:                 03:38                     Absolutely. Well, I'll hit the retail one to begin with because that's more predominant. So if you think about store lifecycle management and our offering, which is new store opening, this is something that is accelerating our customers' ability to go out there and actually dominate and participate in new markets.

Tom Karakalos:                 03:54                     So, even here in Asia Pacific, we've got customers, be it H&M, be it Decathlon, be it whoever it is, where, the fact that we're in there with a cookie cutter way of basically getting them from an initial thought on, "I'd like my retail store to be there," to an up and running VIP night, is painless. It's cookie cutter, it's risk free, and we can do the whole thing while they're concentrating on, "Where do I put my products? And which VIPs do I organize for that event?"

Tom Karakalos:                 04:19                     So, it is very much a risk component that they're able to shift across to a company like us that has done it time and time again, where we don't have those issues whatsoever.

Devon Watson:                 04:29                     Got it. I love that storyline because, to me, that's really taking your physical infrastructure, those branches and stores, and almost turning it into an as-a-service model in some ways, and ... If I think about how our customers are going to compete with online incumbents, right? Being able to take that physical distribution, that physical infrastructure, make it more agile, make it more responsive, change adaptation to the market demand, we can help them do that. That seems incredibly powerful.

Devon Watson:                 05:00                     So, we talked a little about the efficiency side, we talked about the agility that we're bringing to our customers ... Maybe give our listeners a just little flavor of what's new, what's top of mind. You know, what are you really gunning for?

Tom Karakalos:                 05:13                     Well, one of the big ones that we're really trying to head out there, in terms of being a forefront of power in the industry, is to give a complete end-to-end integrated solution to our customers. So, ATM as a Service, or Store as a Service is something that we're heavily pushing. We've spent a lot of time investing in building this offering in a way that is extremely robust, that gives you the flexibility that you need to deal with the nuances of each retailer and financial organization.

Tom Karakalos:                 05:36                     So, an end-to-end solution where they don't have to think about the asset, they don't have to think about the technology, they can disconnect themselves from some of those IT, technical decisions, and they can basically take the position of, "The business outcome we want is x."

Tom Karakalos:                 05:50                     We can assure everything, so we can give them the business outcome they need, but we can manage behind the scenes. Everything, in terms of how the technology comes together, how the software layer integrates with the hardware layer and all that kind of stuff, without them having focus on it.

Tom Karakalos:                 06:01                     I think that's something that's going to radicalize and really change the way that they go to market.

Devon Watson:                 06:05                     Got it. And, if I'm a customer hearing about this for the first time, it's a pretty new approach, right? They probably haven't heard a lot of other partners out in the market place talking about this kind of soup to nuts as a service model.

Devon Watson:                 06:19                     So, if I'm a potential customer thinking about that, who are the right people within my organization to bring to the table to explore that with us? Because it's a different way of thinking about an end-to-end problem and an end-to-end customer journey, and that's something that we've talked to the customers a lot about, is thinking about, "What is it you're trying to enable across the spectrum, for the consumer."

Devon Watson:                 06:40                     So, what's the right time to engage with us?

Tom Karakalos:                 06:42                     So, I think there are a number of people in both banking and retail, where, from a banking perspective, you really need your CTO, your CIO, a lot of that C-level. I mean, these are senior-level conversations that you need to have, right? Because it means that the company has to ... to make a decision as to how much it wants to hold parts of the pie that it will hand across to you.

Tom Karakalos:                 07:02                     So, having the technology part of the business, the business itself and having the innovation and information part of the business coming together ... They're the ones that we need to have that effective conversation.

Tom Karakalos:                 07:15                     From the retail side, it's really looking at ... the people that are involved in driving the expansion of that business out, and looking at, both the profitability of the stores but also the site location, the placement and the markets that they want to enter into. They're the ones that we want to be speaking to.

Tom Karakalos:                 07:29                     If you look at the spectrum of solution that we're providing, it is something that is soup to nuts. It's everything, right? So, a lot of times what happens is, you commence the conversation at a senior level, so that, from a vision perspective, you're seeing eye to eye. And then you see very quickly it trickles down. So it really means that we partner at every level of the organization, be it at a direct, technology level, at an infrastructure level, at a solution level. Even at a business vision level.

Devon Watson:                 07:53                     To me that's such a great way of going to market and engaging because, really, it's their team powered by ours, right? And that's just a great storyline.

Tom Karakalos:                 08:02                     Powered by Diebold Nixdorf, absolutely.

Devon Watson:                 08:04                     Fantastic. Well Thomas, thank you very much. This is a great conversation. Really appreciate the time. I hope our listeners are learning from these and look forward to seeing you again somewhere else around the world.

 

Summary: 

Anna Istnick, Marketing Director of Global Banking Solutions at Diebold Nixdorf discusses self-service retail banking strategies with Diebold Nixdorf’s Brand Evangelist, Scott Anderson.

 

Resources:

ATM Solution Fitness Assessment

Blog: It's Time for Your ATM Solution's Annual Checkup: Take the Assessment

 

Transcription: 

Anna Isnick:                        00:00                     Hello, and welcome to COMMERCE NOW, your source for fintech conversations, along with emerging trends in the banking and retail industries. I'm Anna Isnick, marketing director of global banking solutions at Diebold Nixdorf. I will be discussing self-service retail banking strategies with Diebold Nixdorf's brand evangelist, Scott Anderson. Welcome, Scott, and thanks for joining me today.

Scott Anderson:               00:21                     Thanks Anna. It's great to be here.

Anna Isnick:                        00:24                     To begin, would you mind telling our listeners a little bit about yourself and your background please?

Scott Anderson:               00:29                     Sure. My background, I actually came from a retail banking history. I spent 10 years in a large financial institution, spanning everything from branch, call center, product management, you name it, and had a lot of great experience from a banker's point of view. I kinda get where they're coming from. I've probably spent the better part of 20 years in the self-service industry and working with folks like yourself over the last handful of years and looking at ways to help banks be more relevant in their consumers' minds.

Anna Isnick:                        01:00                     That's awesome. With that breadth of experience that you have looking at things, Scott, from the view of the banker, what role do you see the self-service solution, or ATM, playing in the market today in 2019?

Scott Anderson:               01:12                     That's a really great question and I think there are a few different lenses that the industry and bankers in particular, or even ATM deployers in general, can really look at the ATM, or self-service channel, through. First and foremost, I think the self-service channel is becoming way more strategically important to financial institutions. In particular, as they look at ways of engaging their customers on what is probably the most frequent touch point, that the customer engages with them physically. In addition to that, there are other financial institutions and deployers out there who really look at their ATM channel as a utility. It essentially dispenses cash. It was sort of the first branch transformation, if you will, 30, 40 years ago. I think what's really important when we think about that, equally to both camps, the importance of the ATM is critical, and the availability of that ATM and that trust factor that unattended 24/7 environment is going to be able to fulfill that consumer's need.

Anna Isnick:                        02:11                     Do you see it focusing more on the self-service as an experience? Or you called it a utility as an expense for a financial institution.

Scott Anderson:               02:19                     I think it can be both and I think it is both depending on who you talk to and where those financial institutions or deployers are in their journey of bank transformation. My opinion is that it is a strategic asset to a bank. If we look at the world of fintechs today, they are grasping at ways to enter the physical space and the physical world of their consumers. Banks have this huge opportunity to leverage one of their best assets, which is their physical presence being the ATM.

Anna Isnick:                        02:50                     So true. How do you feel like, from a security standpoint, that FIs are looking to really ensure that that experience is secure?

Scott Anderson:               02:58                     This is one of those areas where banks are grappling with very limited resources to be able to do what they need to do on a day-to-day basis. Security and protection of their brand in their consumers' eyes is critical. That's why I think it's important from a self-service channel perspective that not unlike having a vehicle, we don't let that go without being serviced on a regular basis. We don't let it go without rotating the tires. Most of us aren't even driving cars that are more than five or six years old. I think the ATM channel, because of the importance that it plays as a utility to dispense media and to accept media, but also as a strategic touch point, security and being up to date with security and making sure that that channel is fundamentally trusted by the consumer is critically important.

Anna Isnick:                        03:50                     I totally agree with you on that. I was reading recently about cars and how they said now the cars may slowly decline in the world today because with Lyft and Uber and everything going on that there's gonna be fewer cars. Do you see that analogy with ATMs, or do you see them more as that strategic thought?

Scott Anderson:               04:08                     I think there's a little bit of both going on there. My point of view is, until that last note or dollar is out of circulation, there really is going to be an ongoing need for ATMs. The management of cash and the ability to automate some of those processes instead of having that manual intervention that we have traditionally seen in the branches, the ATM will play a critical role. I don't think it's gonna go away. The operating model may change slightly. It may be, instead of owning it outright, maybe I rent that capability. Maybe I outsource that capability. Ultimately, the importance of that channel, both to fulfill the consumers' needs for cash, but also as that critical touch point in the strategic digital engagement model is still paramount.

Anna Isnick:                        04:54                     You mentioned that cash and how cash is still relevant today. Taking that channel and making it more efficient, do you feel that recycling will continue to grow across the globe and maybe get some pickup in the United States?

Scott Anderson:               05:07                     Yeah. That's a really interesting place. I know you spend a lot of time thinking about this as well and talking to some of the customers that you interface with on a regular basis. If we look outside of North America, recycling has really gotten a very large foothold. Because of the fact, most of the branch optimization, most of that getting automated processes off a teller line has taken place. Therefore, the ATM does a lot of heavy lifting for cash. As that becomes more and more prevalent in a certain environment, or an area, of the world, obviously cash management, cash in transit, all of those things that go along with more transaction through put on an ATM require us to think differently about how we manage the cash and the cash cycle with self-service.

Scott Anderson:               05:55                     Therefore, I think cash recycling is a critical component to that, not only to reduce operational costs and the like, but also to ensure that when a customer wants to receive cash out of the machine, it's available for them, instead of having to worry about whether or not that ATM is out of cash, it's a long weekend. Looking at the business model to drive ways to say, "Hey. Recycling makes sense in these locations, maybe not this location," I think is gonna be very important going forward.

Anna Isnick:                        06:24                     Yeah. That's a great point. I feel that cash is so relevant still. I was just spending some time in Europe. You could see there was a queue at every ATM that we went to, 'cause you always need cash. There was always this queue. When you get up there, you realize that they have different ATMs, the financial institutions: one for recycling, one for dispensing Euros, one would dispense US. It was all different currencies. They had different applications for each. I'm sure that banks are going to start looking at how do we make this more efficient and make more recycling possible.

Scott Anderson:               06:57                     That's a really interesting point that you make because most of the industry would look towards Western Europe and the Nordics as saying, "Hey, they're going cashless." To your point, not so fast. I'd say that's a desire, perhaps, for a lot of payments in that environment, but cash still plays a very relevant role in most consumers' day-to-day lives. Therefore, it's important that there's a vehicle that is automated, secure, available 24/7 to be able to deliver that capability.

Anna Isnick:                        07:29                     Right. I know that we do a lot together as we follow what they call the dash from cash going forward. We've seen, if you agree, Sweden, Africa, India, Asia, some of them are moving fast, but then they get slowed down a little bit just because of the regulations that have to go around and implementing it. Do you think that that is something that will impact the digitization of cash moving forward?

Scott Anderson:               07:52                     I think, again, my crystal ball is cash is gonna be around for a long time. Will it be the predominant payment vehicle in every geography in the future? Probably not, but I do believe that it's going to continue to play a role. We have to look for ways to optimize that so that it's A, easy for the consumer. They don't wanna have to think about how, when, and where they're going to get cash, or make deposits for that matter, which is also critically important. Also, from the deployer's perspective, they need to look at ways that say, "How do I make this a more efficient channel for me? How do I take cost out of the equation?" And turn that model around to say, "Hey, this is actually a strategic value to me because as long as that customer needs to receive cash or deposit cash, it's an opportunity for me. It's a set of eyes on my brand to talk to them and to engage with them in a different way."

Anna Isnick:                        08:47                     That's so important, the ATM's role. What do you feel about the financial institutions and the branches themselves? If their branches are going down are they right sizing and then the role of self-service in that?

Scott Anderson:               09:00                     Yeah. You and I have talked at length about this and the importance of self-service as a transformative strategy for financial institutions. If we think about what's happened in other geographies that are, perhaps, a little bit more advanced than North America with transformation, such as Europe, the ATM is a bit of a utility in the sense that it's predominant factor is to manage media, so cash, both in and out. When we look at the opportunities are in front of the financial institutions in North America, we are still very much grappling with cost of the footprint, whether or not there's financial viability for a branch in a certain location or certain town. I think the ATM plays in a critical role, because it can be a part of that transformative branch footprint while that branch is operational. Therefore, it's part of being in the branch as part of the cash mechanism and engagement model. When that branch is either right sized, optimized, maybe even closed, it's a great leave behind strategy where the ATM can actually be the branch. With the connectivity that the ATM now offers with middleware capabilities and transaction engine-like capabilities, the API world, we can now connect into various parts of the bank without being bogged down by that legacy of having just a standard protocol to a switch.

Anna Isnick:                        10:29                     Wow. You said that beautifully. That's a lot of things that we feel really strongly about, is the ATM in the branch or does it serve as the branch? Serving as the branch, do you feel that with the open APIs it's gonna make automating of more transactions, not just focusing on cash, but really migrating other services and interactions to that self-service device as a more cost efficient way for the FI to operate?

Scott Anderson:               10:52                     Absolutely. I think this is where it becomes that strategic touch point, because if it is the leave behind strategy, or if it is the market entry strategy for some FIs who are looking to expand their footprint, it can't just be about cash and dash. It needs to be about an engagement model that says, "Allow me to interact with this physical presence as I would in my digital world with the bank, or even, perhaps, with a face-to-face person in the branch." It needs to have that connectivity to all aspects of the financial services organization. I'd take it one step further. It's more than omni channel in this sense, because we need to start thinking about that consumer may wanna do other things with other third parties, or other apps. The ATM can then be that vehicle that ties it all together and allows them to interact with their financial institution and peripheral or support services and offerings that may be outside of the four walls of the bank.

Anna Isnick:                        11:50                     You mentioned something interesting there. You mentioned face-to-face. As our consumers are out there engaging with their financial institutions, they want a lot of different things at a lot of different points. What are your feelings about the video interaction with the ATM and face-to-face?

Scott Anderson:               12:06                     Yeah. Look, I think video has a role to play in certain, very specific, use cases and very specific deployment models. I don't think it's a solving equation for mass movement of transactions out of a branch that are card-less. There are other, better ways of doing that, and frankly speaking, more cost effective ways of doing that. Video plays a great role if it's an advisory capacity, if it's an onboarding capacity, or if there were very specific use cases where having that human presence to handle exceptions, to do things such as provide overrides, or even to onboard a customer and validate identity. That's where I think video can play a role. I don't think it has to be a long term strategy for a financial institution to roll that out on mass.

Scott Anderson:               12:55                     I think it can be quite prescriptive to say, "Hey. Here's a business challenge that I have and in the short term, video will fill the need while I build out infrastructure in the back to support a more programmatic way of engaging customers who may or may not have a card and PIN to process with, who may be onboarding with my bank or who may just wanna have some of that more human touch as they interact with the self-service terminal."

Anna Isnick:                        13:19                     Looking at all that from FIs perspective to get that strategy down and think about all those different points that you made, do you feel like there's still a lot of possibilities to be unleashed? Do you feel that FIs today are leveraging these and are they doing it in a modern way? Because sometimes the life cycle of an ATM can be out there longer than is needed to meet requirements and security as things evolve. Do you think banks are ready to look at that and make decisions?

Scott Anderson:               13:47                     Yeah. This is probably the catch 22, because I think a lot of business minded people in the banks, a lot of business owners in the banks, would like to move forward much faster and be able to deliver on some of those journeys and some of those capabilities that we just talked about. The challenge, the dichotomy, that we have here is there's a lot of legacy mired into the channel, mostly from a connectivity perspective and how the ATM is managed for transaction processing.

Scott Anderson:               14:16                     I think what's also critical important is hey, if we wanna do some of these strategically important things and engage our customers in more meaningful ways, I need to have an infrastructure in a physical box that is up to snuff, that can actually handle some of this heavy lifting, that I can rely on, and that I don't have to worry about the age of the terminal or security layers on that terminal or the processing capabilities of that device to be able to support consumer demanded engagement, which is much more robust, much more like mobile or online banking environments versus that traditional, easy flow, pick an account, pick an amount, pick a receipt option and get your cash. We need to take it to the next level. I think financial institutions need to think about that and re-examine their investment methodology in the self-service channel and think about it less as that utility and more as that strategic touch point, especially as we look at branch transformation and engaging our consumers in different ways.

Anna Isnick:                        15:20                     As you say that, do you even envision that bigger, not just the ATM as the strategic ... part of the strategic channel, but also the back end of their systems and their software systems that are tying together everything? Does that need a refresh also?

Scott Anderson:               15:33                     Likely, yes. If we pick on the American marketplace a little bit for a moment, most of the financial institutions are somewhat handcuffed by the processing environment where it is what it is. That's how I process my transactions. If we think about ways that, whether they do it themselves or they look at partnering with others to help them build out that middle layer, that infrastructure, there are so many better ways for us to connect into other aspects of the bank, or outside of the four walls of the bank as I had mentioned, and bring more meaning to an interaction at the ATM than simply cash and dash.

Anna Isnick:                        16:10                     Awesome. Well, is there anything else that you'd like to add as we close that you think it's very important for financial institutions to consider as they look at their technology from an ATM self-service standpoint?

Scott Anderson:               16:21                     I think if I were to have a leaving thought, it's always a good time to do a look in the mirror and say, "Hey. Am I at the best optimal operating model for my self-service channel, or are there things I could do to improve that?" I think there's no harm in investigating options and opportunities to say, "How could I be better? How could I optimize this environment? How could I make it more cost effective, or perhaps even a better revenue generator for my financial institution?" All of this ties back to, "What's in it for my end customer?" At the end of the day, it's making sure that the self-service channel is part of that strategy to remain relevant with your consumer. My parting thought is, don't just look at this as the odd time the customer comes and touches me to get cash. It is eyes on your brand every time they visit the ATM. We should be treating it as such and involving that in the overall end to end customer journey, regardless of what transaction it is they're processing.

Anna Isnick:                        17:24                     That is great information to think about as they look at their entire strategy. It sounds like you're recommending financial institutions to do an ATM health check or fitness check on their self-service network.

Scott Anderson:               17:33                     Yeah. Absolutely. I think there's a great, easy tool that we have that people can go through very quickly and share their results internally and build a plan around acting on some of those opportunities to enhance and improve.

Anna Isnick:                        17:46                     Yes. For our friends tuning into the podcast, if you'd like to go to www.dieboldnixdorf.com/ATMfitness, you can learn more about your self-service strategy status. Well, thank you so much for joining us today at Commerce Now, Scott.

Scott Anderson:               18:02                     Thank you, Anna. It was great chatting with you.

Anna Isnick:                        18:04                     Likewise. Thank you to all our listeners for tuning into this episode of COMMERCE NOW. To find out more about self-service in retail banking, go to www.dieboldnixdorf.com/ATMfitness, or click on the link in the podcast show notes. Until next time, keep checking back on iTunes for new topics on COMMERCE NOW.

 

 

Summary:

Banks’ investments are leaning heavily toward technology upgrades – especially those that make self-service, digital banking easier for customers, as Karen Webster with Pymnts.com discussed in a recent conversation with Diebold Nixdorf Vice President of North America Solutions Heather Gibbins.

Resources:

Pymnts.com Article:

Diebold Nixdorf: Why Bank Branches Need to Move Beyond the Transaction

Blog:

Is Your Bank Embracing These Key Mega Trends 

Why Digital Is Important Right Now

The Future of Payments is Fast Evolving, but the Direction Might Surprise You

How Innovative is Your Banks Culture?

COMMERCE NOW (Diebold Nixdorf Podcast)   Diebold Nixdorf Website   Transcription:

Amy Lombardo:                00:00                     Hello, and welcome to COMMERCE NOW, your source for emerging trends in the banking and retail industries.

Karen Webster:                00:14                     Heather. Thanks for joining me today. I'm looking forward to our conversation about branch automation, migrating transactions, and the role of technology in making all of that smooth. Thanks, again, for making the time.

Heather Gibbins:              00:28                     Oh, thanks for having me.

Karen Webster:                00:29                     So, Heather, I want to start with an interesting proposition. So, it's clear that financial institutions are using data, they're using new tech to keep pace with expectations that their customers have about going digital. Yet, so many studies that we've done of consumers and their preferences for financial services say how much they really love the branch, and how important the branch is to those consumers in making decisions about who they actually want to bank with.

Karen Webster:                01:12                     Why do you think there is such a dichotomy between wanting technology to help consumers be more effective, yet the role of the branch in helping them navigate their financial situation?

Heather Gibbins:              01:27                     So, I'd probably say a couple things with this. One, when we hear about branch automation, itself, what we're definitely hearing and seeing is that it means different things to different financial institutions, and then what that effect actually has on consumers, itself. I would say in general, the role of branch is transitioning to be less based on transaction, with more of an emphasis on becoming a trusted advisor. And, I think that's where some of the study and research and information that you come back to kind of shows this dichotomy between the two items.

Heather Gibbins:              02:03                     So, you have financial institutions that are saying like, "Listen, let's migrate these transactions over to more of a self-service platform." Customers like technology. They're willing to use the technology, but at the same time you've got customers that are saying, "Hey, we want you to help us make better financial decisions for ourselves. Set us up for the future, think about retirement and planning, so that we can manage our finances in a better way."

Heather Gibbins:              02:31                     And that's a lot of the research that we've heard and seen, as well, is consumers are looking for financial institutions to basically help guide them and make better decisions with their money moving forward. So, they no longer want them to just hold their money and keep it safe, and maybe get some sort of return on it. They want them to give them their expertise and knowledge to make a better decision moving forward.

Heather Gibbins:              02:57                     And, I think that that's where you kind of sometimes have a difference between maybe the actions that are perceived actions that financial institutions are taking versus what you hear in research, but they really compliment each other. It's just really then at the end of the day what's the role of those face-to-face interactions in the branch, itself, going to be moving forward.

Karen Webster:                03:18                     Yeah, it makes sense, and your point about self service, I think, is a good one. Not only are consumers comfortable with self service, but they can actually use the services on their own time, so after more traditional banking hours, weekends, holidays, et cetera. So, I agree with that. And given that, that self-service capability is creating less of a responsibility for the branches to engage in those transactions.

Karen Webster:                03:49                     You're saying physical branches are really being transformed to create these more one-to-one interactions that build trust and loyalty. What specifically do you mean by that?

Heather Gibbins:              04:00                     One of the things that I would say is meant by that is what we're seeing more and more is the role of the branch changing to be, one, trusted advisor, but also to be able to spend more time with what we would consider commercial customers or small business customers. But, you'll see customers like that that are coming into the branch. So, there are these small businesses that are actually getting workspace within the branch. They can conduct meetings in the branch. You've got others that are trying to use the branch space to be more of an inviting place for community members to be able to come in. And, some of them are even showing the local sports games and stuff that are on, holding after hours events there in that space.

Heather Gibbins:              04:44                     So, it's becoming much more of a community space, and one that can drive more business within small business owners, itself, or small businesses in general, so that they can have strengthened relationships there and also increase in activity with those businesses moving forward.

Heather Gibbins:              05:04                     So, I think that's a lot of what we're seeing when it comes to that, and when customers and financial institutions are thinking about what is that "branch of the future" really look like, those are some of the considerations that they're taking into play as they're designing what that setup looks like versus what you would have seen in the traditional branch in the past.

Karen Webster:                05:25                     So, Heather, are these big banks, small banks? I mean is what you're describing, which sounds awesome by the way, something that is particularly characteristic of one type of bank versus another?

Heather Gibbins:              05:36                     I think we're seeing it across the board, and some of the larger top ten banks that are out there, they've been playing with this over time, especially in the US, and have been making some headway.

Heather Gibbins:              05:46                     We've also seen some that have more of like nische kind of clientele in the market that have gone and moved forward with these types of branches. Where we're seeing a lot of our activity right now, in North America specifically, is in those smaller regional and community banks because number one, they've got to keep up with what some of the others are doing; two, they're trying to figure out how do we really differentiate ourselves from what the competition is doing. Or, maybe how can we kind of get ahead of what they're doing. We are talking about really catering yourself to small business types of clientele and also the community.

Heather Gibbins:              06:26                     A lot of that is a way for some of these smaller financial institutions and credit unions to be able to kind of have that personal touch that can give the type of experience in consumer or business journey that these small business owners are looking for that's beyond what maybe some of the larger financial institutions have been able to achieve.

Heather Gibbins:              06:47                     And so, it gives them a way to really look at this from a differentiation and competitive advantage moving forward.

Karen Webster:                06:54                     Yeah, that makes sense and I think the whole point of the smaller regional community banks is to become more a part of the community and the fabric of businesses. So I can see where that would be something they'd want to really wrap their arms around. But, as with so many things, Heather, technology which is enabling a lot of these things to happen certainly can't happen just because technology is making some of these automation ideas reality.

Karen Webster:                07:32                     What are the things that people and business process need to do in order to really fully embrace the capabilities that technology can provide?

Heather Gibbins:              07:43                     Yes, so I think that's probably one of the number one things that we tell all of our customers that we're talking to is, if you think that you're just going to put some technology into place and that's it, most likely you're not going to be successful.

Karen Webster:                07:57                     Right.

Heather Gibbins:              07:59                     A couple of the biggest things that come around that are really like the people and the processes, and probably more important than that, the training that goes along with it. So, a couple of examples, and even in just some of these branch automation or branch of the future type of concepts, a lot of what we talk about as a part of that, yes, technology comes into play there, but when you talk about having meeting spaces and the more open area, and you've got some people that are doing coffee bars and big screen TV's and all that kind of stuff, a lot of it doesn't even involve technology.

Heather Gibbins:              08:33                     So, when we get into this more consulting and advisory services, a lot of times they're taking what you consider your tellers and they're becoming more sellers, right? Or, advisory consultants. The thing with that is they must have information at their fingertips when someone walks through the door to be able to enable them to be successful. So, a big part of that that comes into play from a technology side, but maybe less than from what you would traditionally consider is really data. You have to be able to share data from all of your different systems in order to enable what you want your people to be able to do moving forward.

Heather Gibbins:              09:10                     The other thing you have to really think about is the training aspect of that of how you want them to interact with customers, how you want them to greet customers, how you want them to take them around, what your new branch looks like. But, also to make sure that they feel comfortable using the technology that you now have into play. I can guarantee you that if you walk into a lot of financial institutions, credit unions today and someone comes in and wants to do just a check deposit, that teller's going to take the check and do the deposit just like they do every day.

Heather Gibbins:              09:43                     More than likely, what a lot of executives are probably wanting those tellers to do is to actually either: a) show them how to do it on the ATM so that they can do it themselves, or open up a mobile banking device, show them how to download the app and show them how quick and easy it is to be able to do that transaction at home. And there's so many customers out there today, and consumers out there today that don't even know that their financial institutions have that as an option.

Heather Gibbins:              10:13                     A personal story, we had a friend and she made mention that she owns a couple small businesses and she couldn't go to the bank to deposit some checks because they weren't open. It was a Sunday, and I just kind of looked at her and said, "Who do you bank with? I'm sure that you can do it on your phone." And she literally, I walked her through how to do it, not even a member of that bank or anything like that, and she said, "Heather, this is like life changing."

Karen Webster:                10:36                     I was just going to say you changed her life.

Heather Gibbins:              10:39                     Yes. Exactly. So, it's just those simple things that sometimes some of the financial institutions need to think about, like hey, how do we make sure we're training our people to get the expected behavior we want from consumers, but also makes it a better experience and more convenient for them?

Karen Webster:                10:58                     So, you mentioned two things. Tellers as sellers, I thought that was awesome. And there's a training process around that, and that is just any other change management training process, it takes time and it will eventually be successful. But, data sharing strikes me as something that could be a bit more problematic.

Karen Webster:                11:19                     How are the financial institutions you deal with addressing that, and getting the right data in the hands of the right people so that all the things we talked about are possible?

Heather Gibbins:              11:31                     Yeah, so I think it can go in various stages or phases. Just to give you a real quick example, too. At one point I needed to get pre-approved for a loan. We were going to buy a new house, and I was shopping around from different providers and I decided to take one of my local financial institutions, and go online and fill out the form. And a few days later I had realized I still had not gotten any information back, and I thought oh my gosh, did I just give all my information to someone and I have this security problem now.

Heather Gibbins:              12:06                     So, I picked up the phone and I called the call center, and when I called that call center they were like, "Heather, we don't have any information that says that you did this." They said, "Did you fill it out online?" And I said, "I did." And they're like, "Oh, well yeah if you fill it out online, we're not connected to that system. It's a completely different group and so we can't help you. You need to email the person and maybe they'll help you."

Karen Webster:                12:30                     What?!

Heather Gibbins:              12:30                     So, again, my consumer's journey was not the greatest. I ultimately did not go to that financial institution. But, I think that this is very common.

Karen Webster:                12:40                     Right.

Heather Gibbins:              12:40                     I don't think it was specific to this one financial institution. So, some of this is just behind the scenes, if that teller can go on and be able to log into the system to see information. Some of that is just a very simple sharing of data. It's not the best use case, but they need to be able to have access into systems to see information.

Heather Gibbins:              13:01                     We've got other financial institutions that are saying, "Okay, we want to have full, let's say CRN integration", so when someone walks into the branch, if they go to the ATM, I can see on my tablet exactly who's at that ATM, if there's maybe some sort of value add service that I could offer them, to be able to disclose to them. If they have a CD that's coming up for expiration, and I might be able to go help them renew that. That it gives them the information they need to help.

Heather Gibbins:              13:31                     So, we've got many that are saying, "Okay, let's figure out what's the role of these tellers moving forward?" In many cases they're calling them something else, maybe they're a concierge or that type of thing, and giving them a tablet that can help them have better interactions moving forward.

Karen Webster:                13:47                     Is part of this, too, training consumers and small businesses that this is just as effective as walking into the bank? I know that sometimes people think that if they go to the bank, somehow service is expedited or availability of funds is faster than if they did something electronically. Is there some of that that needs to be dispelled, too?

Heather Gibbins:              14:13                     I think there's some of it in some cases, but at the end of the day when you look at consumer behavior today and think about who are some of the strongest ... And I go to retailers when I think about this, too, and I talk to customers about it because the interactions that consumers are having with retailers, whether it be people like Amazon or even mobile applications that they're using, like Uber, or walking into the Apple store, they're comparing you to that on a daily basis.

Karen Webster:                14:45                     Right.

Heather Gibbins:              14:45                     Right? And in many of those cases, they're not interacting with someone face to face, right? Yeah, I would tell you I've never interacted with someone face to face at Amazon, yet I would say I have a very strong relationship with Amazon, right?

Karen Webster:                14:59                     Yep.

Heather Gibbins:              14:59                     Probably the number one thing that I use on a daily basis.

Karen Webster:                15:04                     Yep.

Heather Gibbins:              15:04                     And my loyalty and trust factor and everything with them is just as strong, if not stronger, than other places that I go face to face. So, I think that's also another thing that these financial institutions need to look at, kind of like you said with the research that you've seen that people want to do things face to face. Sometimes they're doing things face to face, not because they really want to, but maybe because that's the way they: a) have to do it.

Karen Webster:                15:30                     Right, right.

Heather Gibbins:              15:30                     For some reason it's easier that way or more convenient than another method. And one example I would use is, you go to the grocery store and see the self checkout lane. I'm the type of person that I'm going to go to the self checkout lane. But, I don't go to the self checkout lane if I have a huge cart of things, because I know that that scanner's going to yell at me all day long because it won't all fit in the little spot I have to bag it. Or, I know I have bananas today and I have no idea how to weigh them. Or, I'm getting a gift card and I can't get it activated. So, that's what then moves me back over to face to face. It's no longer easy or convenient. It's kind of the way I have to go, to go to the person at the cashier.

Karen Webster:                16:11                     Yeah, some of it is just, as I said, force of habit or a misperception about funds availability and things which are easily remedied through education. You talked about mobile, and the first part of our conversation was about shifting from face to face to self service and adding face to face in a different, more value-added capacity. And now mobile is just another layer on top of that.

Karen Webster:                16:46                     What are you seeing, the FI's you're working with, how are you seeing them incorporating mobile into the mix?

Heather Gibbins:              16:54                     So, I think mobile is probably becoming one of the most widely asked items when it comes to putting it in the mix. So, we've got some financial institutions that are saying, "Okay, how can we integrate the mobile device with the ATM itself." Right? So, how can I pre-stage transactions?

Heather Gibbins:              17:16                     One of the things that also comes up is how do you start using your mobile device maybe to not only pre-stage the transaction, but as an authentication method at the terminal itself, as well.

Heather Gibbins:              17:29                     The other thing we have people looking at with mobile is thinking about how do I add other services into that mobile application and that can speak and talk back and forth with the other channels that we have? So, we have a lot of customers that have talked to us, and in my 12 years that I've been here we've always talked about Omnichannel. So, with Omnichannel, how do you get all the different channels that the financial institution owns? So that could be mobile banking, online banking, the ATM channel, the call center, the branch, all working together and kind of sharing information and playing off of it.

Heather Gibbins:              18:06                     That could be as simple as if you have online banking and you set up bill pay, and you're paying your bills on there on a regular basis. Then if I go to the ATM, it could say, "Heather, are you sure you really want to take that $300 out? You have these bills that are scheduled to be paid in the next two days, and you're not going to have enough money in your account if you do that." Right? So, again, it's the financial institution advising me through digital, do I really want to do that and if so, oh yeah, send me a text reminder that I need to make a transfer, or I need to think about what I'm going to do. So, it's really getting mobile involved and digital in general coming together with the physical location.

Karen Webster:                18:48                     So, when we talk about smart ATM's and introducing mobile and authentication through biometrics, is that what you're talking about?

Heather Gibbins:              18:57                     Yeah, that's a big part of it. I mean, what we've seen over time, and if we look globally at some of the global markets, biometric ID verification has been going on for many, many years over there. In the US market, we haven't seen as much adoption, especially around the banking or financial industry, itself. And we've always said, "Oh, it's not widely accepted here in the US like it is in other regions."

Heather Gibbins:              19:25                     However, probably anyone that's listening to this, if I were to ask them, "Okay, can you go check your email real quick." They're going to go to their phone and they're going to use their thumbprint to access their phone. Right?

Karen Webster:                19:38                     Yep.

Heather Gibbins:              19:38                     And this thing, I took my kids to the orthodontist last week. They walked in, they did their thumbprint, and we moved on. I never even had to do anything. So, now it's becoming, okay, it is more widely adopted.

Karen Webster:                19:51                     Right.

Heather Gibbins:              19:51                     How do we start to transition that adoption into the financial industry. I mean, I'm sure like me, when I go to log into apps on my phone, I'm really annoyed if I have to try to remember my password for these different applications if I can't just use my thumbprint.

Karen Webster:                20:08                     Yep. Yeah, no it's friction, friction, friction, friction. It's a mess, and we're all trying to get rid of that.

Karen Webster:                20:15                     You know, one thing that we haven't touched on, and I'd like to spend just a minute on is the landscape of risk associated with now having so much of a digital mobile presence within the banking channels. What are you seeing there and how are you helping financial institutions balance digital with managing those risks?

Heather Gibbins:              20:38                     I think that one of the biggest things here is I had come across some research not too long ago, and it basically asked consumers, "Who do you trust most with your financial needs?" And the first answer that they trusted the absolute most was who they bank with on a daily basis.

Karen Webster:                20:58                     Right.

Heather Gibbins:              20:59                     The second item outside of that was other banks and credit unions. And then the third started to get into people like Paypal and Amazon and other spintec corporations. And that's really kind of thinking about ... You start to talk about who are these other entrants coming into the financial space, and a lot of times you're getting into these spintecs.

Heather Gibbins:              21:22                     But, I think this is really important information, because for financial institutions consumers are saying, "Hey, we trust you the most." which means, when you start to look at risk and security, they have to stay at the forefront and the top and be very proactive about what they're doing as far as security measures, whether that be at the ATM or through digital and how those all plays together, especially when you start integrating with other spintec organizations in more of a connective commerce-type of ecosystem.

Heather Gibbins:              21:55                     And that some financial institutions are really, when we have these conversations, is at the forefront. Everyone's talking about Windows X right now and how do you make sure that you're staying up to date and migrating all your terminals, both from a physical and logical security perspective to stay on top of it.

Heather Gibbins:              22:14                     But, this has really become what I consider table stakes in the industry. It's not always the most exciting topic. And, when you go to get approval from a CEO or the CFO, it's kind of like, what is our consumer going to see, and it's not real flashy. However, if they don't do that, it's the first thing that their brand is going to take a hit with and you're going to lose trust, and that's going to open for new entrants into the financial industry stakes if they don't take care of it.

Karen Webster:                22:46                     Yeah, a conversation to be had is how consumers perceive innovation within the financial services sector? Because I think, sometimes people think of innovation as what you just described. Oh, it's the flashy, flashy thing that has bells and whistles and people look at and say, "Wow, isn't that so different?"

Karen Webster:                23:08                     And in financial services, getting back to the trust factor, consumers want their money to be safe. They want to have a relationship with the financial institution they trust and whom they believe are looking out for their best interests, including keeping their financial information and their money safe and secure.

Karen Webster:                23:29                     So, there's definitely, you're talking about dichotomy, there's an interesting dichotomy there as well with perception and reality when it comes to what consumers are looking for and what FI's are providing.

Karen Webster:                23:43                     Last question, Heather. It's been a fascinating conversation, but we've talked about a lot of things and I'm curious to get your take on what FI's are doing as they're planning for this migration between branches and automating and self service and mobile, and managing risks. How are they thinking about what I'm doing today, and what I need to be thinking about a little longer term?

Heather Gibbins:              24:12                     So I think today in many cases it's the simplicity around transferring the traditional teller transactions onto the ATM itself, or other types of digital devices. In many cases, they're looking at this from a pure standpoint of how do we reduce tellers, how do we improve efficiency? In some cases, how are we expanding the types of transactions that we can offer in a self-service device, which could then allow us to extend the hours?

Heather Gibbins:              24:44                     So, they are looking at ways to be able to do that and kind of lower the branch costs, and even in some cases centralize expertise. So, you start to think about how do I not need to have a loan expert at every single location? How can I have them more centralized and be able to have access to many more people in a very easy or convenient way?

Heather Gibbins:              25:06                     So, I think those are kind of some of the short terms, like what are they trying to accomplish and how are they trying to do it? I think in the long term, it's a bigger play around how could this morph into something like transaction augmentation where staff can either be remote? Or, in the branch they can have awareness or context into the self service transactions, itself.

Heather Gibbins:              25:31                     How can we appropriately interject into things when it makes sense? So, maybe you don't always have to have someone speaking to you face to face, or through video. But, when you do need them, it makes them easy to be there to help you, and that would be with things like exception handling, giving them advice. Again, this goes a lot back to the whole concept of being able to share data across CRN systems, tablets, and that type of thing.

Heather Gibbins:              25:56                     We've also got a lot of customers that are starting to think about, okay we've gone through this kind of migration of mobile and online banking platforms, so that you have more one, single digital platform. At least that's the goal for many institutions. Now you have more and more teller transactions moving over to the ATM, but what they're starting to think about is, okay, so what do we do with this teller platform, itself, and how do we bring it up to the 21st century here? And this is where we think there's a big opportunity to leverage the same infrastructure ecosystem between the teller line and the ATM's, itself. To be much more digitized and have a much more fluid consumer interaction moving forward, and make it easier for tellers.

Heather Gibbins:              26:43                     So, tellers have traditionally stood behind the teller line and had a PC. Well, in this new kind of branch for the future, all that really should pretty much go away, and it's much more about tablet. Well, how can you just end up using the same platform either across some of your digital channels, or also your ATM and teller platforms and how do those interplay more and more together?

Heather Gibbins:              27:07                     So, I think you're going to see also digitization and a collapse of having all of these multiple platforms on all these multiple channels that are siloed, coming together and reducing, which in the end is going to reduce cost for the financial institution, itself, as well.

Karen Webster:                27:27                     Well, and they make for a better customer experience. The experience that you, yourself, encountered will be an ancient anecdote when that happens. And certainly from a consumer perspective it can't happen soon enough.

Karen Webster:                27:42                     Well, Heather, it's been a real pleasure having this conversation today. I enjoyed it. I hope you did, too, and I appreciate your time.

Heather Gibbins:              27:48                     I did. Thank you so much.

Karen Webster:                27:49                     Thanks, Heather. Bye-bye now.

Amy Lombardo:                27:51                     Until next time, keep checking back on iTunes for new topics from COMMERCE NOW.

   

Summary:
In today's topic we're going to discuss the very interesting year of 2018 in the retail industry and we'll talk about what's to come in the new year.

Resources:

Blog:

How Self-Service is transforming Fast Fashion and In-Store Retail Experiences

Our Mobile Shopping Innovations are headed to EuroCIS

COMMERCE NOW (Diebold Nixdorf Podcast)   Diebold Nixdorf Website

Transcription:

Amy Lombardo:                00:00                     Hello and welcome to COMMERCE NOW, your source for emerging trends in the banking and retail industries. I'm your host Amy Lombardo, and in today's topic we're going to discuss the very interesting year of 2018 in the retail industry and we'll talk about what's to come in the new year. I've got a special guest joining me today. It's Andrew Busby, one of the UK's most influential retail analysts. Hey Andrew, thanks for joining us.

Andrew Busby:                 00:27                     Hi, Amy. It's great to be here.

Amy Lombardo:                00:29                     Good. Let's talk a little bit about your background first. You have a 20 year plus career in the retail space. How did you get started? And talk to us a little bit about your passion?

Andrew Busby:                 00:40                     Amy, my career, I guess started about 20 years ago. I joined Kingfisher, one of the major retailers in the UK, and I was working there for a number of years. Retail I think, is really one of those things where you either love it or you're not so keen on it. And I just love the sector. It's so relevant to all of us. Unlike some of the others, we have relationships with our favorite retailers or brands that we don't necessarily have with utilities or telcos or whatever. So, they become part of our lives, and I think that for me is one of the great things about retail. And also particularly now as I'm sure we'll talk about, there are just so many things that are happening right now in retail, and lot of things which will common both in the US market and here in the UK and Europe, and I think a lot of the retailers are going through the same issues and challenges.

Amy Lombardo:                01:36                     Very good. Talk to us a little bit about those challenges. 2018 was a pretty interesting year here. You saw so many different store models go digital, offering different convenience options for consumers. With that said, how would you define the 2018 year for retail?

Andrew Busby:                 01:59                     I think that what we're witnessing ... and it is happening. I think this is a real watershed moment in retail that we're going to look back on. I think 2018 and going into 2019, what we're witnessing in front of our eyes is a transition from what I refer to as old retail into new retail. What I mean by that is that the old model, the more traditional retail models are quite hierarchical. They're commanded and controlled from the center, they're top down in a way that they're organized.

Andrew Busby:                 02:31                     And of course they were founded long, long before the Internet was ever around, let alone this online shopping and e-commerce that we see today. They've had to adapt. And of course then you get the new retail that doesn't have all the burgage, if you like, and the old and out of-date infrastructure that old retail has. They can build their systems, which are absolutely ... and also their structures, which absolutely fit for purpose around what they want to do. I'm thinking in particular of the pure play online brands, which have a ... I guess have a sense of purpose about what they are in business to do that some of the others perhaps don't, if that makes sense.

Andrew Busby:                 03:17                     I think that we're really seeing this transition, and it will continue over the next couple of years. I don't normally like to look too far than two or three years out, because I think the pace of change is so rapid that it's almost impossible to look further than three years out. We simply don't know quite what's going to happen or what's going to be adopted by the consumer. In one word, I would say that it's change, and in five words, I'd say it's change, change, change and more change. That's what we're seeing at the moment.

Amy Lombardo:                03:51                     It's interesting that you say you can't predict that far out because there are so many storylines that hit the new cycle this year that you never anticipated. We have everything from smart fridges and locker concepts and then you think, "Okay, well what's possibly next?" And have we created this society that it's almost become so convenience based. Will we ever go back to a simplistic retail model? I don't know.

Andrew Busby:                 04:20                     I don't think we will. I think we've got so used to the ease and convenience, which we're seeing right now. But of course the thing to remember there, which I think you were alluding to, is that that's getting even more convenience. Take payments for example, which is in some ways the most exciting part the retail landscape, but also its scenario, which is developing quite rapidly. And we'll get the point within the next few years where we'll see far more invisible payments. Whether you'd be filling your car up with gas, you'll just fill up and you'll drive off because it's automatically been ... payment's been taken.

Andrew Busby:                 04:57                     We're seeing far more frictionless experiences. Of course there's Amazon Go, which we know about, and we'll see more of that. I think ease and convenience in whatever way and forms that it takes is going to continue. And of course online and having deliveries to not just at home but to wherever we want, that will rapidly become the norm. And I think for ... one of the biggest challenges for retailers is having the supply chain and logistics capability to deliver very, very quickly to pretty much ... and by very, very quickly, I mean almost within the hour to almost any location.

Andrew Busby:                 05:36                     In order to be able to do that, they have to have in real time 100 percent, or as near to that visibility of their inventory, which almost without exception, none of them currently do. Some may come reasonably close to that, but ... so I think that's an area that we're going to see a lot of development going into.

Amy Lombardo:                05:55                     It's interesting, we were talking Christmas time, and I think one, two years back, whereby at the beginning of December, you get the messages that say, "Okay, if you haven't placed your order, it's not going to arrive to you by Christmas." Well, that's not the case today. You probably could still get an order on the 24th. I'm sorry for that delivery man or woman who's bringing it to you, but you can still get that delivered in time, right?

Andrew Busby:                 06:22                     Absolutely. Yeah. Yeah, but actually one of the other aspects that, which we're already starting to see has come forward is ... and we don't notice it over here, but I understand that the 19th of December for the first time this year, was the national returns day where the volume of returns for the year peaks. It used to be I think one or two days into the new year. That is a reflection on the amounts of trading that happened over Black Friday, Cyber Monday and so forth.

Andrew Busby:                 06:50                     But also, it's a really interesting thing for me because that sets quite an insight into us as consumers and our behavior. Returns are increasing, and that puts a huge strain on retailers. I personally happen to think that it's not a good thing, but the problem is it's a question of who blinks first. And of course nobody's going to. In other words, everybody wants ... they want to offer free returns, free shipping, et cetera, et cetera, but it is driving a level of consumer behavior which is quite alien. We're treating our own bedrooms and our living rooms as our changing rooms, and ordering ... and I've spoken to people who order quite regularly up to 20 items and they'll return 18 of them.

Amy Lombardo:                07:30                     That's so fascinating that you are saying that, because I know I've adapted to that style here in my own home. I'm over buying things because I'm like, "Well, it's really easy to return it. I don't have to go to a store.", Or for Amazon, I can just drop it off here at their local UPS station." But I wonder what the facts are. Do you have any information on that? Is it more advantageous to the retailer when consumers are overbuying, or does that shipping just totally negate that overbuy?

Andrew Busby:                 08:01                     For retailers, it's a complete nightmare for them because a journey of a returned item can be quite torturous, and it can go through up to seven touch points and can take not hours or days, but sometimes weeks to get back to where it should be, if you like, depending on how it's returned. And that volume, that peak that I referred to from my understanding, in the US I think it was 1.5 million parcels were expected to be returned, and during December, a million per day, which is huge.

Andrew Busby:                 08:32                     And as I say, for retailers what it means is that their inventory is all over the place, but they're still expected to be able to know where that inventory is to be able to make those commitments to next day delivery when people are purchasing. It becomes a vicious circle for them. But you think of it as a roundabout, and it's spinning ever faster. But it's going too quickly now for anybody to jump off. So yeah, you just got to hang on. It's an interesting one.

Andrew Busby:                 09:01                     And as you said from your own experience, yes, it is far too easy, too many ways to return because that's being seen as part of the overall customer experience. It has to be easy to return. You mentioned Amazon. In the summer, they launched their Prime Wardrobe, so you order three or more items and it's delivered free, and it comes in a box, and it comes with a returns delivery label already there. You try on, and you keep what you want at, then you pay for it, and you return what you don't and you just leave the box outside your front door. So yeah, very easy, very convenient. And that's what people expect.

Amy Lombardo:                09:37                     Right. One of my favorite case studies right now is Rent the Runway. Because if you think about things, "Okay, I've got to then dryclean an outfit", or "Oh, now I have to think about return timeframes and such." This is an all-in-one experience of pick the clothes, pick the style, look at the reviews, and your purchase includes everything. It comes to you clean, you're sending it back clean, you have a certain timeframe to do it. It's such an easy, frictionless, seamless experience. That buzzword that we said earlier.

Amy Lombardo:                10:09                     That's where I want to dive a little deeper into here, because frictionless, seamless, moving transactions into meaningful connections. Those have been such some strong words that retailers and even vendor partners have been using over the last year. Can you give some recommendations here on how a retailer can still maintain that customer, that consumer experience, but still introduce these types of digital and frictionless transaction sets?

Andrew Busby:                 10:44                     It's interesting because just a word on frictionless. I think the majority of transactions, we welcome that, and particularly the type of transaction. In other words, there'll be certain types. For example, throwing a dinner party, but you haven't got one particular item, whatever. Dash out, because you need it there and then, to the grocery store. You want that to be as frictionless as possible. You want to get in and get out as quickly as possible because you've got a deadline of when your guests arriving and that sort of thing.

Andrew Busby:                 11:12                     Then there'll be other transactions. Let's say that you're buying ... I don't know, a watch or jewelry or something like that, where you actually welcome an element of friction in ... and I mean friction by fact that the whole transaction can be slowed down. You're wanting, you're expecting to have more engagement with the store associates, those sorts of things. But from an experience point of view, it's interesting. What I would say in answer to your question, my recommendation so forth is don't let the technology lead in itself because we're all human and we're all driven by emotion, and we make because we are able to have emotions.

Andrew Busby:                 11:56                     What I say to people is first of all, think about and understand your brand and what it stands for and what are the brand values, if you like. Once that's very, very, very clear, then and only then when it's understood, can you then make the sorts of decisions you want about what technology you want to deploy, and what perhaps isn't quite so appropriate for your brand. Because there'll be some which would be absolutely lend themselves perhaps to augmented reality, virtual, mobile and so on and so forth, but there may be others which lend themselves more to much more of a human interaction.

Andrew Busby:                 12:34                     But having said that, I think that ultimately, as I said, we're all human. We all want to have a relationship with retail brands on an emotional level, which is why I said at the beginning that retail is an exciting sector to work in. I would say always human first, technology second.

Amy Lombardo:                12:53                     Right. It's such an interesting way to position it. The emotion and the relationship side of a retail purchase, or say your favorite store closes in your neighborhood. That is such a letdown because it becomes part of your norm. And yeah, I just think that's a fascinating concept to think about. The emotion tied to it.

Andrew Busby:                 13:12                     I think so, because in some ways we're creatures of habit, but in other ways we're not. We're not as loyal as our parents' generations that have gone before us. We do behave for more promiscuously when we're shopping. We jump from brand to brand. But at the same time ... I know it myself. I probably navigate the supermarket when I do my shopping in pretty much an identical fashion every time I go in, and I will go for the same brands of whether it be ... I don't know, shampoo or washing powder or whatever. I'll go to the same, and I wouldn't be drawn to other ones.

Andrew Busby:                 13:49                     With a store closing down, you suddenly then are taking away parts of our lives, and we might have to travel a bit further, or we don't go to that particular retailer any longer. So yeah, it is an emotion driven sector in that way.

Amy Lombardo:                14:05                     With the traditional brick and mortar branch and that style changing, whether it's hybrid type locations, smaller footprints, specialty shops. Are there opportunities then when retailers can actually partner with other verticals within retail to be able to offer this ultimate consumer experience? Like, "Hey, you can get the two in one now. I can offer you this and that." Are you seeing that there over in the UK?

Andrew Busby:                 14:35                     Yeah. I do get what you're saying, and I think that we could well start to see that. But what I am starting to see evidence of is people are starting ... and this is talking about the in-store experience and the role of the store. We know there's all the pressure from online, and that the percentage of their sales is only getting greater and greater. None of us really know where it will plateau out, but we do know that it's continuing to grow at the moment. The role of the store is under the fiercest scrutiny. But what I am starting to detect is that people are rethinking the role.

Andrew Busby:                 15:09                     In other words, the traditional role of the store is very obvious. You've got a building and you fill it with stock, put products on the shelves et cetera, et cetera. And you expect people to walk in and buy stuff, and that's the role of the store. We've refined that, but that's basically how it is. They're beginning to have some examples where people actually don't think of a store as selling first. It's a place for people to commune, to socialize.

Andrew Busby:                 15:36                     I quite often use the example of Selfridges because as we know, that was ... Harry Selfridge in 1909 opened that store on Oxford Street in London. Of course Harry Selfridge was an american who came over here. But if you read some of his quotes and some of his writing, he was incredibly so far ahead of his time because he could come out with those ... you can quote him now, and it is incredibly relevant. That's exactly what he wanted Selfridges to be. He wanted it to be somewhere where people could gather. If they bought something, so much the better.

Andrew Busby:                 16:12                     An example of that is ... and we've seen this more in some of these specialty retailers. Rapha is an up market chain. Not too many of them, but they refer to their stores as clubhouses, and they'll all have a coffee bar, and they just encourage their ... I don't think they refer to them as members. Some people refer to their customers as guests, so it's a reimagining or rethinking if you like, of the relationship. They encourage people to go in and if they want to buy on that particular occasion, okay, that's fine, that's great, but if they don't, it doesn't matter.

Andrew Busby:                 16:44                     Lululemon, the yoga and gym gear and so forth, they have yoga classes in store, and they organize events where like minded people can come along, and if they're into yoga classes, if they're into running or as I said with Rapha it's cycling ... it's a completely different approach to the role of a store, and I think that we're going to see a lot more of that, which is really exciting because it will mean we view them in a completely different way, where we gather there, we can exchange views and ideas, we socialize and that's an incredibly exciting development that we're just seeing.

Amy Lombardo:                17:20                     Yeah. Alright. Let's look ahead now. Pretend you're holding your magic eight ball, you're shaking it up, what's it going to say for the changes that we're going to see for 2019?

Andrew Busby:                 17:31                     To sum it up in a word, well, we're going to continue to see change. That's the first. But then to expand on that, for a lot it's going to be quite troubled and challenging. There are lots of pressures. Obviously we've over here decided to implode ourselves. We've decided to get out of the EU, which hasn't really added too much to anything. But it is having quite an impact now because what it's doing is affecting consumer confidence, and that will go well into 2019, so that's that backdrop.

Andrew Busby:                 18:01                     But I think what we're going to see is that retailers are going to develop and cultivate relationships with their customers far more. They are going to understand more about us. They're going to deploy artificial intelligence and machine learning so that they can deliver far more personalized experiences. That's going to be one major trend that we're going to see. Hyper personalization in 2019. Because at the moment, most personalization is fairly basic and fairly crude. It's usually retrospective. It is not in the moment, and it's not relevant to us because we've perhaps already made that purchase.

Andrew Busby:                 18:37                     We're going to see that develop, which again, is incredibly exciting because I think that once people get over the feeling of intrusiveness, and when brands deliver real value to them, then I think we're going to welcome them. We'll welcome them into our lives in a far greater way than we do now. That's going to be the main trend for 2019. Another one which I touched on earlier which is going to happen is the final mile delivery. I think brands will come to be defined not by the price of their product, but their ability to deliver to us pretty much whenever and wherever. It will be quite normal that we suddenly find that we need something, maybe we're at a conference, or we're at a sports event, or we're at a music concert or whatever it happens to be and we need a particular item. We just grab our smartphone, and with a few clicks we've got something on order and it's delivered to us within the hour.

Andrew Busby:                 19:29                     We'll be prepared to pay a premium for that, but that will become the expectation. Of course as soon as one person starts doing that, then all the others have to follow because it becomes the expectation. The bar is continually being set higher and higher. Another one I think will be the internet of things. Everything is going to be connected to everything, which again is going to lead to more convenience. And all those utility items that we purchase, that will all just be automated as well. I think we're going to start to see that in 2019.

Amy Lombardo:                20:03                     That was a lot of answer there. That was a big magic eight ball you were shaking there. Alright. My final question for you today, Andrew is, based on those trends, those predictions, the idea of the hyper personalization, the last mile, execution, the internet of things. Say you're sitting in front of a retailer and they come to you and they say, "Andrew, where do I start here on my transformation? Give me some pointers on at least how to create my roadmap here." Where would you tell them to begin?

Andrew Busby:                 20:34                     Depends on the challenges that they're facing, but I think that ... the way that I look at it is every retailer is on the same journey, but they're all at different parts of that journey. I would say that if they haven't ... if it's not on their roadmap already, they need to put artificial intelligence on there, and do that as quickly as they possibly can because all the while that they're not, they're missing out. They will never catch up to their competition. From a technology perspective, that would be one where ... possibly to contradict what I said earlier, but the reason for that is that that drives ... without that, you cannot drive the personalization that I referred to. That's just one point.

Andrew Busby:                 21:18                     The other point I think is that as we know, is most retail brands have well over spaced. They got far too many stores. I would say to them, ask yourselves, "What do I want to be famous for?" Is it having a huge store estate? I know that a lot would like to reduce that, but they simply can't because they're locked into long term leases and so forth. But I would say be famous for something. Going a little bit back to what I said about brands and understanding your brand, understand what you want to be famous for, what do you want to be known for.

Andrew Busby:                 21:54                     I've mentioned a couple of brands, Rapha and Lululemon, and they're very clear about what they want to be famous for. Another one that's a different end of the spectrum if you like, is fashion retailer Primark, and they're famous for having much, much lower cost items, but offering real, real value to people. And so everybody knows, they understand when you mention that brands to them, that they know what they stand for. I think that applies to all, whether it'd be much, much smaller artists and retailers or far larger. Everybody knows what you mean when you talk about Amazon. You know what that brand stands for. That will be the start point. Understand what you want to be famous for and build from there.

Amy Lombardo:                22:33                     Got it. Well, I think that's a good way to close the discussion here, Andrew. It was a pleasure having you join us here as a guest, and thanks to our listeners for tuning into this episode of Commerce Now. To find out more about the future of retail, go to dieboldnixdorf.com, or click on the link in the podcast show notes. Until next time, keep checking back on iTunes for new topics from COMMERCE NOW.

 

Summary: In this episode we'll discuss how organizations can keep up, and what is expected in order to stay ahead of their competition.     Resources:   Blog: Services for a Connected World 
Silicon Foundry

LinkedIn: Steve Gotz

Twitter: @stevegotz

  COMMERCE NOW (Diebold Nixdorf Podcast)   Diebold Nixdorf Website   Transcription:  

Amy Lombardo:                00:00                    

Hello again. This is Amy Lombardo, your host for this episode of COMMERCE NOW. This year we've seen some significant technology trends, and we know the knowing your audience and increasing the level of personalization is key to the success to this ever changing digital world. But this can be easier said than done, right? So, in this episode we'll discuss how organizations can keep up, and what is expected in order to stay ahead of their competition. So, listeners I've got a real treat for you today. I'm joined by Steve Gotz who is an expert in working with executives to create impactful corporate innovation strategies. He has over a 20 year background working with a range of global organizations such as AT&T, General Electric, and Symantec, and one thing that you'll be most interested in is his recent work with Umpqua Bank, which we'll touch on a little bit in this discussion. So Steve, thanks for joining me today.

Steve Gotz:                        00:49                    

Thank you. I'm glad to be here.

Amy Lombardo:                00:50                    

Wonderful. So let's start a little bit with your background, and just really what keeps you up at night.

Steve Gotz:                        00:57                    

I think what keeps me up at night is relevance. So, my background. Quick intro. So, 20 years working with big companies like you said in industries that are undergoing change, and a really interesting thing is it doesn't matter what the industry is. Corporations are really in a race for relevance, and whether you're an entertainment company, whether you're a movie studio, whether you're a bank you have to think about ways to be relevant to your customers today and into the future.

Amy Lombardo:                01:23                    

So, that's an interesting comment. Okay. Race for relevance. Could you dive into that just a little bit more for me, or maybe give me an example of some recent work you've seen on how someone has caught up or stayed ahead maybe of the race for relevance?

Steve Gotz:                        01:35                    

Yeah. So, I think a really interesting one that I can point to is AAA. The automobile club, right? So AAA is an American institution, and their business model up until now has been predicated on your car breaking down on the side of the road, you're picking up the phone, you're calling them, and them sending somebody there to help you. Now, a couple of years ago they recognized that they're sitting on a dinosaur. That business model isn't going to exist 10, 20, 30 years from now. We have autonomous vehicles, when we have cars that don't break down with us behind the wheel, their business model needs to change.

Steve Gotz:                        02:11                    

So, what I think they've done is really interesting, right? So they're investing in infrastructure and thinking about how can AAA be relevant inside of the home, and I think that's a great example of an incumbent corporation that's saying, "You know what? We're going to face this head on, and we're going to drive this change. We're going to drive this disruption rather than waiting for us to be disrupted by the market."

Amy Lombardo:                02:32                    

That's such a great example because AAA is something that I just rely on so heavily in my own life, but I haven't thought about yeah what would be next for a business like that, or thinking back to the stories of like Kodak or Blockbuster or something. Why it did or did not work for them because their business models needed to change with the rate of pace of change here.

Steve Gotz:                        02:53                    

Yeah. So, the last couple of months for me I've spoken to maybe 200 executives. So these are CEOs, Chief Digital Officers, Chief Technology Officers, entrepreneurs about what's changing in their business, and what's really interesting is we've kind of gotten through this first era of innovation. So, every corporation talks about innovation being one of the most five, one of the most 10 important things that they're focused on. But if you look at the number of ideas that have come from an innovation lab that have found their way to production inside of big corporate, that number is pretty small. But I see happening now and with people are talking about is this second wave of innovation. This more impactful, this more intentional strategy to say, "We are going to build things that are going to change our business."

Steve Gotz:                        03:41                    

And change our business in a way that is going to make us relevant into and beyond the 21st century, and this is different, right? So I think you said at the beginning. When I started my career, I started at AT&T labs in the music industry, and this was at the beginning of the rise of digital distribution before we had iTunes. When we took this, basically AT&T invented something underlying technology to iTunes, right? Secure digital distribution. And when we took it to the labels, the music labels at that point, their response was really telling. The response was, "We're not interested in this. We sell things. We sell things that spin. We're never going to sell our music over the internet."

Steve Gotz:                        04:20                    

So, this was in the late 90s, and that was your classic Kodak response from an incumbent. Fast forward 20 years, and when I talked to bank CEO's, they don't talk like that anymore. What they talk about is, "Yes, absolutely. We need to change. We need to create new experiences, and here's how we're going to do that, and here's where we are doing it." Right? So, this idea that the banking industry is facing a Kodak moment, I'm not an advocate of that line of thinking, right? I think the banking industry is responding very differently than some of those other traditional industries that have been disrupted.

Amy Lombardo:                04:54                    

Right, okay. No, that makes sense. So, in some of my research on you, the work you've done, you've talked about this idea of the innovation theater, and is that what you were speaking to earlier, which is kind of this innovation 2.0?

Steve Gotz:                        05:08                    

Yeah, that's exactly it. So, if you look at kind of the last 10 to 15 years of innovation, it's very clear that companies are recognized they need to be more innovative. However, the tools, methodologies, and frameworks they've deployed, they resulted in what some people call innovation theater, right? It's really pretty, you go into the innovation lab, you see an interesting application. But then when you pull back the curtain to say, "Well, what's the path to production?" Right? How many customers are using this? That's where you tend to realize there's not much substance there. I think a lot of people have recognized that, and now they're thinking about, "All right. How do we do that?"

Steve Gotz:                        05:45                    

Right? So, we're seeing this kind of growing kind of drive. An increasing number of corporations that are sending out new company builders, new organizations designed to create things, and scale things up, right? Don't just show me something in the lab, show me how you take what's in the lab, and get it in front of all of our customers, and make us more relevant.

Amy Lombardo:                06:08                    

Right, right. So, the example Steve you're giving about this innovation theater, almost like the innovation smoke and mirrors, I'm also kind of thinking in banking terms now of what Chase has done with the everyday express branch, and Capital One with the café branch, I mean these are realistic examples of innovation-

Steve Gotz:                        06:30                    

Yeah.

Amy Lombardo:                06:30                    

That has now been brought to life, and the results and at least the studies show that consumers are gravitating quite well to these concepts.

Steve Gotz:                        06:38                    

Absolutely, and especially around banking. The Capital One café, it's a really interesting idea, and I think it kind of gets to this point that physical is still important, right? Being able to bridge digital experiences with physical experiences, that's kind of the next competitive battleground. And I think Capital One, Umpqua Bank, I think we ... And even Amazon with Whole Foods. I think we see an increasing number of organizations getting much more sophisticated at spanning the omni channel experience.

Amy Lombardo:                07:10                    

Right, right. So you mentioned Umpqua, and that is such an interesting case study here. So, tell us a little bit about the work that you did with that bank.

Steve Gotz:                        07:18                    

Right. So, Umpqua is really interesting. I got connected up with Ray Davis in 2015, and Ray is kind of an iconic figure in the banking world. He grew Umpqua from $100 million in assets to about $24 billion in assets, and he was really driving the industry, and created a unique customer experience, right? So, for Ray they're not called branches, they're called stores. In those stores, there's a very unique experience when you go in. A store are part of the community, a store holds coffee hours. People could use the store as a co-working space. So, Ray and Umpqua is really kind of the leading edge of the ideas that we're talking about today, and so much so the now Capital One is kind of borrowing some of the ideas that Umpqua pioneered a historic concept.

Steve Gotz:                        08:04                    

So, I got connected up with Ray in 2015, and in the first conversation he was like, "Look, the bank I built for the last 20 years isn't the bank that I need for the next 20 years, and I need some help to figure out what that new bank is." So, the mandate was figure out how to pivot the bank, right? Ray is a gentleman who likes to name things what they do, so it wasn't a digital adventures lab, it was Pivot us. Easier to pivot the bank. So, we started down this path, and what we got to fairly quickly was the banking relationship is a unique relationship. Money is such a loaded topic for people, for consumers, and 20 years ago the banker was your neighbor.

Steve Gotz:                        08:41                    

The banker knew your first name, they knew your kids, they gave them a lollipop when they walked into the store, right? There was an experience attached to that, and when we fast forwarded today, and we the state of digital he said, "It's impossible to create that really personalized digital experience right now with the technologies that were available." So, the question was how do we engineer the human in? How do we create that personalized experience through a digital channel? And that's what we set out to build from.

Amy Lombardo:                09:11                    

I think that's so interesting that you say that because a few years back we had this interesting study, that was how consumers could differentiate their toilet paper brand over their bank brand, and I say that. And of course, the source is escaping me, but-

Steve Gotz:                        09:29                    

Right.

Amy Lombardo:                09:30                    

But it was all around the fact that banking had become this emotionless interaction. No, really it was more the transaction. You need to move into an interaction here, and your examples here of putting the human element bank in is a perfect way for banks to be thinking about this. Can you give our listeners some specific technology examples if those are relevant and okay to [inaudible 00:10:00] out here?

Steve Gotz:                        09:59                    

Yeah. So, before I do that going back to your idea of kind of toilet paper brand and banks.

Amy Lombardo:                10:07                    

I know you didn't think that what was going to come out of my mouth.

Steve Gotz:                        10:12                    

If you kind of step back a little bit, and you kind of look at how the industry go to where it is today, what you see is in the pursuit of cost efficiencies, the customer experience has been lowered significantly. In the last 20 years, the industry has done what it should have done, right? Which is use technology to be more efficient. But in the active being more efficient, they've created a customer experience that's not that great, and by lowering that bar so far it's now become really easy for two kids in a garage in Palo Alto to create a new mobile banking experience that can run circles around most of the existing incumbents, right?

Steve Gotz:                        10:55                    

Now, the opportunity is to change that. There's no reason that two kinds in a garage in Palo Alto should be able to create a better experience. Incumbents can do that, which is where we get to this idea of, "All right. How do we create new teams? How do we create new environments to build these things?" And that's kind of really what we did at Umpqua. Ray's mandate to us was don't go give us some prototypes. It was figure out how to keep us relevant. So, that started with the customer relationship. We said, "How do we take that in-store experience that we have today that really personalized experience when you walk into the store, and create that, and then catalyze the experience in an additional channel."

Steve Gotz:                        11:35                     So, when we looked at the technical landscape, what we said is, "The future of the industry is chat based. It's dialog based systems." So, let's think about how we engineer the human in, and do that at scale. Let's think about how we can deliver a chat interaction, a highly personalized chat interaction with a human. So, what we started building is eventually we started using WhatsApp, and some of the existing chat platforms. But very quickly we ended up building our own application primarily for security and privacy reasons, right? So, if you're using Facebook Messenger as a bank to service your customers, if you're using WhatsApp there are potential privacy implications that come along with that, that we were uncomfortable making. So, we ended up building our own technology stack.

Steve Gotz:                        12:24                    

And essentially what we did was we put a device in the hands of our employees, of our associates in the store, and said, "You now have the opportunity to chat with customers." So rather than make this a call center initiative, we pushed it out to the edge, and the response was phenomenal both from customers, and from our employees.

Amy Lombardo:                12:44                    

Now, was that a cross-channel application to where that chat feature was available both on mobile, and online?

Steve Gotz:                        12:52                    

Yeah exactly, and the idea of it. So everybody talks about getting customers to come into branches, and the question is we can't get customers to come into branches now. I don't think we're going to get them to come into the branch in the future. One interesting kind of dynamic that we observed is if the customer knows who they're going to see in the branch, who they're going to interact with, there's a higher tendency to come in. So, the idea was we can use the chat, right? We can use the online interaction with the customer to pull them into a physical experience. So, if the customer needs to have a more in-depth conversation. Maybe the retirement planning, 401k, 529 plan.

Steve Gotz:                        13:30                    

We can say, "All right. Maybe it makes sense just to sit down and have this conversation in the store, and we can get something scheduled." So, the human interaction becomes a really interesting way to pull people into the store for more engaged conversation.

Amy Lombardo:                13:43                    

I love the example you just gave me because it speaks so much to what we believe and strive to deliver to bankers, and retailers here at Diebold Nixodrf by delivering connected commerce. This idea that you have this seamless journey throughout various touchpoints that it doesn't have to seem like, "Oh, I'm only engaging in the branch. Oh I'm only engaging on my mobile phone." It's the same experience, and you're giving a perfect example of it right there.

Steve Gotz:                        14:09                    

Yeah, and I think the idea behind connected commerce is really powerful, right? It's the bank ... The bank almost becomes an orchestrator on the behalf of the consumer, right? The bank captures the intention, the bank understands what the consumer needs to do regardless of the channel, then it helps them do that, right? This is the core of what we saw a couple of years ago. This is what banking used to be. Now we have technology to deliver that experience in new and different ways at scale with efficiency.

Amy Lombardo:                14:39                    

Mm-hmm (affirmative). Okay, so you just touched efficiency, and that was this one question I was writing down here. So, I've been looking in all these reports as to what are going to be these top pain points for bankers in 2019 and beyond, and what seems to be the top three of all those lists is around creating better operation efficiencies, back end transformation, etc., etc. Can any of your line of work? Do you see that holding true? Is that something that bankers are talking to you about as well? Are there some strategies in place that you can comment on to accomplish that, but still now lose that personalization aspect?

Steve Gotz:                        15:13                    

Yeah, yeah. So, I think there's ... A lot of people focus on kind of consumer facing, kind of innovations and efficiencies because that tends to be where a lot of the top line growth is. So, sometimes I think back offices operations doesn't get as much attention as it should, but I think there's an equally large if not more number of opportunities in the back office to do things better, faster, and cheaper while you maintain that front office customer experience. And I think ... Again, the idea of what we're talking about here, which is companies can create structures. Companies can create new types of environments to solve our problems. We can look for places where this happened, and I think one of those places would be with Liquid Labs, and the auto group in Germany.

Steve Gotz:                        15:59                    

So, the auto group is one of the world's largest retail conglomerates, they own a lot of properties. Six years ago they set up an organization called Liquid Labs, which is really designed to solve hard problems for the organization, and the model there was Liquid Labs would have a budget, they would go to a business unit and say, "Oh we see you're losing $150 million." And these numbers are hypothetical. "We see you're losing $100 million dollars a year on return shipments because we've had issues with the address. We can fix that problem for you, we can fix it in a discoverative way, and if we succeed you now have a new capability that improves your efficiencies." And in fact that's exactly what Liquid Labs did for the auto group, and they drove significant efficiency improvements just with the very strategic application of technology.

Steve Gotz:                        16:47                    

So, banks have those kinds of opportunities in spade. When we arrived at Umpqua, the number of operational efficiencies the word technology brought to bear was substantial. So, the question is what's the right portfolio, right? What's the right portfolio mix between kind of front facing, consumer applications, and back office? Let's make this engine as efficient as we can make it.

Amy Lombardo:                17:12                    

So, do you have a thought on that of what is that perfect balance? Is that the next project for people to turn to you on?

Steve Gotz:                        17:19                    

Well yeah. This is I think why kind of proclamations are dangerous. I think this is one of those places where I think it really depends on the organization, and the state of the organization. When we got to Umpqua, they have just been through a core transition, starting to think about other projects that need to get done. So, there were some strategy decisions and said, "You know what? We're going to really focus on that customer experience while we give the organization time to figure out what's going to be the internal digital transformation strategy." So, that was the right mix for Umpqua. I think you have other organizations that are fairly sophisticated on the front end where they could use focus on the back end efficiency. So, that's a long way of saying it depends.

Amy Lombardo:                18:05                    

Okay. Fair enough. All right. I'm going to throw this one out to you Steve.

Steve Gotz:                        18:08                    

Okay.

Amy Lombardo:                18:08                    

So, we talk a lot about this idea of retailing banking. It's not just banking, it's retail banking, and really these two industries converge together. Would you agree with that statement? Have any thought around is banking really retail banking?

Steve Gotz:                        18:23                    

Absolutely, absolutely. It's retail, and in my view the bank has a role in that, right? Today and into the future. The bank is an orchestrator of commerce, the bank is at the center of that experience. That's a powerful idea that I think is just coming to.

Amy Lombardo:                18:38                    

Mm-hmm (affirmative). Right. In any of the work that you do, do you find executives challenged with branch closings, and just trying to find that optimal footprint here, and just some of those challenges that are keeping them up at night around branch locations, and branch size?

Steve Gotz:                        18:54                    

Yeah, so this is a perennial problem, right? And the problem of a branch is a catch 22. Everybody knows this. The branch density is very high in America. That's for a reason. You ask Americans kind of how they choose their bank. At least up until a year or two ago, branch location, branch convenience-

Amy Lombardo:                19:12                    

Okay. Yeah, exactly.

Steve Gotz:                        19:14                    

Was one of the top choices, right? Now what's interesting is it's often the top choice, but when you look at the stats about how often do people go to the branch, they tend not to go in. So, they say it's important, but they don't go into the branch. So, this is the catch 22. You start shutting down your branches, you start kind of reducing your branch density, you start losing those deposits because customers have a fixation with the branch. The way we thought about tackling this was, "Okay. They say they want it, but they don't really go in all the time. So, what do they really want?" And what they wanted was a lifeline. What they wanted was a safety net, a connection.

Steve Gotz:                        19:54                    

So, we're like, "Okay. If we can give them that same kind of feeling with a dedicated digital banker, maybe the physical doesn't matter as much. Maybe we can reduce the density of the branch network, move to a destination branch strategy, take all of that OPEX off the books while keeping the people, right? And the people are important because they're really key to creating this personalized experience of that digital channel. And if we can do that, we can start right sizing the branch network while deepening the relationship with the customer at the same time.

Amy Lombardo:                20:24                    

Right. Oh my gosh. I have the perfect example just in my home life. Several years ago, my husband and I, we were going through some sort of refinancing, and we had to have a check physically signed by this particular ... The institution that was through our loan. I'm looking online and I was like, "Okay, I live in Ohio, and the closest is in New Jersey." And there was no options other than take this check physically to New Jersey. Nowadays I'm like, "Well, now we have check box features, and video tellers that I could have made that work." But several years ago luckily we just ironically we have a family member that lived there, and we happen to be visiting, and we went out of our way to go to this bank branch.

Amy Lombardo:                21:09                    

But it was such a hassle, and just to think how technology has come and crossing those channels, that had been no problem today. But that seems like eons ago, yet it was maybe only like two, three years ago.

Steve Gotz:                        21:25                    

I mean we've trained consumers to kind of have this unnatural connection to the branch.

Amy Lombardo:                21:31                    

Right.

Steve Gotz:                        21:32                    

Actually, that's not entirely accurate because at a certain point it was natural. Before a lot of the digital technologies we have today, that branch network was really valuable. We're getting to this point now where it's not so valuable we can right-size it, but the burden is on the industry to weening customers off that expectation, to show customers that we can deliver you the exact same experience through our digital channel, and it doesn't matter if the branch that you normally go to around the corner isn't there anymore because you're not going into it that often anymore.

Amy Lombardo:                22:02                    

Right. But of course it's just finding that balance of how often do you still need that physical interaction to potential create that emotional connection versus, "I just need the quick, easy transaction here."

Steve Gotz:                        22:14                    

Yeah. So the idea behind Pivotus Engage, which was the platform that we've built as over time if a customer can chat with the same person over, and over again they're going to develop a relationship, right? A professional relationship, and they're going to start trusting this person. And this is important because bankers used to be trusted. Over the last decade though, that trust has waned. So we're like, "How do we get back to that?" It's the same person, same conversation, interacting with the customer over time, and at a certain point the customer is like, "Yes, I need help here. I need help there." Right?

Steve Gotz:                        22:47                    

You can almost see the switch flip in the relationship where the customer starts to trust the banker on the other side, and that's when magic can happen because when you're in that trust space relationship with the customer, you can then advise, you can then recommend, you can then orchestrate commerce, right? Which is what we're talking about.

Amy Lombardo:                23:07                    

Yeah.

Steve Gotz:                        23:07                    

Then you can be able to play with that relationship, and if you can get there, that's where I think exciting things happen in the industry.

Amy Lombardo:                23:14                    

Okay. So, Umpqua came up with this or you helped with this engagement platform, and really the idea in general around experience platforms. Of course, there's obviously the personalization aspect, but what also is necessary to enable them?

Steve Gotz:                        23:32                    

I think you'd be from the top down of the organization. So technology is easy, right? I mean building the underlying tools to create new experiences. That's easy. Our experience is most people that are working in the bank, they want to do more. They want to help their customers. The want to support them. I think the critical element is the will, the drive, and the impetus from the top of the organization. From the board and the CEO to say, "We're going to do this." Right? "We're going to make an investment in creating new experiences for our customers. We're going to make an investment in retrofitting our technology organization so that we can create these new experiences."

Steve Gotz:                        24:11                    

I think without that kind of top down commitment, you end up with what we were talking about at the beginning, which is innovation theater.

Amy Lombardo:                24:19                    

Yeah.

Steve Gotz:                        24:19                    

Because the kind of change we're talking about, it takes time, it takes commitment, it hurts sometimes, right? Because people have to change. That only happens if that commitment is there within the C-Suite.

Amy Lombardo:                24:31                    

Got it. So, and maybe that's a good closing point here, and just getting that buy-in from the highest level. Is there anything else maybe you'd want to share with our listeners here on ways to think about how they're transforming their business?

Steve Gotz:                        24:48                     

Yeah. So, I think what I would leave people with is there's this emerging zeitgeist in Silicon Valley, which is we're entering the age of the big company, right? We're entering the age where having a good idea isn't enough. To actualize that good idea you need data, you need distribution, you need customers, you have capital. All of those things live within the four walls of every company out there, every bank in America who has these things, and I think the opportunity is to find creative ways to leverage those assets in new and different ways, right? I think it's somewhat presumptuous to suggest that the banking industry is facing its Kodak moment because I don't think it is.

Steve Gotz:                        25:28                    

I think the banking industry has never been better positioned to control its own future, and that's what I'm excited about, and that's what your listeners should be excited about.

Amy Lombardo:                25:36                    

Very good. Well Steve, this was an awesome conversation. I got a lot out of it, I hope our listeners do as well, and thank you of course for taking the time to be with us, and to our listeners for tuning into this episode of COMMERCE NOW. To learn more about this topic, log onto www.dieboldnixdorf.com. Until next time, keep checking back on iTunes or your podcast listening channel for new topics on COMMERCE NOW.