Banks Renew Effort to Quell Consumers’ Aversion to ATMs
About a decade after the electronic banking revolution began, Tom Pearce waits every Friday for a teller inside Independence Bank in Canoga Park instead of using the automated teller outside.
“I’m basically an introverted and self-conscious person,” the soft-spoken, 36-year-old Pearce said as he stood in line last week. “I don’t like people looking over my shoulder when I’m doing a transaction.”
Pearce’s distaste for the machines is common. Only one of every three Americans who holds automated teller cards uses them. Besides frustrating many branch managers’ dreams of line-free lobbies, that banking industry statistic has raised concern at a time when banks are investing increasing amounts of time and money in large, interbank automated teller networks and projects to put machines in supermarkets, airports, hotels and stores.
As a result, the banking industry, which refers to the machines simply as ATMs and has spent about $1.5 billion on them nationwide, is stepping up efforts to promote them to wary customers.
Reminiscent of ‘70s
Their efforts resemble those when the equipment began to be introduced in the early 1970s. Many banks are sponsoring sweepstakes that can be entered only by using the teller machines. Some have special checking accounts that offer savings to customers who wean themselves from human tellers. And one branch manager at a San Fernando Valley branch of the Bank of America says he has occasionally walked along a line handing out $5 bills as ATM bait.
“The way people are going to make money from these things is if they have a broad usage,” said Catherine Brown, a spokeswoman for the Washington-based Electronic Funds Transfer Assn. Brown described last month’s annual convention of the trade association, whose members are machine manufacturers and depository institutions, this way: “Again and again, people were saying, ‘What’s the good of this technology if people aren’t using it?’ ”
Advice of ‘Guru’
“It seems to me that, if we tear off into the future without figuring out how to market ATMs, we’re going to be in trouble,” said Linda Zimmer, a self-employed researcher and lecturer whom many electronic banking managers regard as a “guru” of ATM research. Zimmer’s reports on the use of ATMs over the past several years yielded the so-called “33% wall,” a phrase describing the percentage of users nationwide and the difficulty banks have in increasing it. Zimmer emphasizes that her number is an average and that percentages vary from bank to bank.
Another researcher who monitors ATM use, Spencer Nilson of Santa Monica, believes the percentage of card holders who use the machines is closer to 42%. He also disputes Zimmer’s figure--just over 58,000--for the number of machines nationwide. Nilson contends there are only 49,000.
Bankers and industry observers say California’s user percentages tend to be higher. Two reasons they give are the weather, which allows use of outdoor machines for more of the year, and Californians’ openness to anything new. Among California’s five major banks, usage numbers range from 35%, for First Interstate Bank of California, to 60% at Wells Fargo Bank, whose people credit their high figure to such measures as putting two machines at every location so that one is always likely to be operating even if the other fails.
‘Geographical Microcosm’
Combined, the five major California banks have 148 ATMs in the San Fernando Valley. The banks--the others are the Crocker National Bank, Bank of America and Security Pacific National Bank--have a total of 2,516 machines. They estimate they probably have about two-thirds of the machines in the state and that proportion is probably about the same in the Valley. Rusty Watson, a Ventura-based banking consultant who specializes in ATM issues, says that branches from all five of the major banks and the variety of other banks here make the Valley “a geographical microcosm of what is happening with retail banking throughout the state.”
Although Watson and some other industry experts say many banks don’t do enough to lure customers to the ATMs, that charge cannot be made against Manuel Mateus, vice president for marketing at the Encino-based Independence Bank. Mateus’ description of what is happening at Independence gives some sense about the ambivalence that bank managers have toward the people problems and the potential of the machines.
Independence, with eight of its 10 branches in the Valley, began installing the machines three years ago. Over the past year, the bank has hooked its machines to those at 88 other banks. It plans to join another network that is putting the machines in supermarkets. Yet, when Mateus speaks of his ATMs, the disappointment is clear: Only about 40% of the bank’s 35,000 customers use them.
“It drives you crazy,” Mateus said. “The branch managers sit there and these big lines form, and there’s nothing you can do about it. In the past year, we’ve said we have to do something to increase the usage of these machines.”
Money Giveaway
So, Independence recently promoted its ATMs by giving away money. Eight customers got specially marked receipts during ATM transactions. Then, amid a small group of reporters and photographers summoned by the bank’s public relations agency, they each were allowed a chance to pull as many $20 bills as they could out of one of the bank’s ATMs in five minutes. One Independence official stood to one side with a stopwatch in hand, urging the frantic “contestants” on with all the enthusiasm of a game-show host.
The bank pays officers $2 every time they persuade a new customer to take an ATM card. Those who give away the most receive monthly bonuses ranging from $175 to $250. There is no service charge on transactions done via ATMs. Besides, the bank makes a point of letting customers select their own personal identification number, or PIN. Many banks assign the numbers, which must be punched into the computer after entering one’s card. Mateus believes that letting people select their PINs helps them remember the number. Forgetting their PINs sends many new machine users back to teller windows, bankers say.
Bank of America, for example, assigns PINs. Electronic banking managers there say that Mateus’ method might be better, but it hasn’t been proven.
Experiment by Army
The U.S. Army has done the most advanced research on technology to replace the number codes. Earlier this year, in an experiment in Indianapolis, the Army tested ATMs with an eye toward having them dispense soldiers’ salaries. Capt. John Herko, who helped run the program, said users identified themselves to the machines by inserting four fingers into a device that measured aspects of a hand’s structure that are unique in every individual. The pilot program probably has decided the Army against ATMs for reasons that involve the dynamics of the military payroll, Herko said. But ATM manufacturers are taking an interest in the identification system.
Bank managers believe the most common inhibitions among non-users include the worry about looking foolish upon making a mistake and a fear of mid-transaction robberies or fraud committed by a person who has somehow gotten one’s card or PIN. Industry insiders concede that those things do happen, but can be avoided through caution. To reassure the self-conscious and thwart snooping, ATM manufacturers are working on models with partitions, according to the Funds Transfer Assn.
In March, the Justice Department released a controversial study saying that U.S. banks lost $70 to $100 million in 1983 because of fraudulent use of automated tellers. Lost or stolen cards figured in a third of the challenged withdrawals, and 72% of the customers victimized in these cases acknowledged that they had kept their PINs in their wallets or purses with their bank cards. Overdrafts were another reason for challenged withdrawals.
But Zimmer, Brown and others are highly skeptical of the study, arguing that its methods, based on a survey of 16 commercial banks that she says were situated mostly in urban areas, were not thorough.
In the mid-1970s, when the machines started to proliferate, they got a reputation for breaking down. But the electronic transfer association’s Brown says ATMs now work about 98% of the time.
About the only thing on which bankers seem to agree when stereotyping those who don’t use the machines is that age plays a big part: Older people, not having grown up with computers, are the hardest to sell. The machine’s typical user, Brown said, is under 45, affluent and married to someone who also works.
The earliest machines, which Zimmer says were used in 1967 in Britain and Sweden, were intended to give out money on days when the banks were closed. As they became increasingly used in this country in the 1970s, banks bought them out of a kind of herd instinct, fearing their services would be unequal to their competitors.
Cost Now a Factor
Not much effort was made to measure their benefit, because of to the assumption that they were an absolute marketing necessity. That is changing. Increasingly concerned about labor costs and investing in projects such as ATM networks, bankers these days are more determined than ever to get their money’s worth for the up-to-$50,000 price of putting in an ATM, industry observers say. Hence, the promotions.
“The fact is that ATMs are never going to be used by everyone,” said Joyce Harrison, director of advertising at Valley Federal Savings & Loan Assn. Valley Federal started installing its 22 ATMs two years ago. She said that 30% of Valley Federal’s 30,000 card holders use the machines. “And we will always have to serve the customer who doesn’t want to use the automatic teller,” Harrison added. Still, Valley Federal is running a sweepstakes in which customers toss their ATM receipts into a bin. Top winners in the drawing will get a cruise to Ensenada. Bank of America started its own sweepstakes April 1, with a grand prize of $10,000. The bank has the most ATMs of any in the nation, 1,200, with 71 of them in the Valley. About 42% of the bank’s 3.8 million card holders use the machines, executives say.
1974 Role Model
If Valley Federal and other local banks need a role model, they might look across the country to the classic case of Tillie the Teller, a 1974 campaign by the First National Bank of Atlanta to give its first five ATMs personality.
“A pretty little blonde with a red and yellow polka-dot dress,” is how J.D McBrayer, the bank’s vice president in charge of electronic product development, described the fictional Tillie. The bank put decals with a picture of her on the ATMs, dressed actresses like the character for TV ads and stationed another set of attractive women in front of the machines to demonstrate.
Zimmer says the number of transactions in the months before the bank’s new machines got their name was about 2,000 per machine per month. After Tillie’s debut, the figure quickly jumped to 8,000, added Zimmer, who said the marketing campaign set a standard in the industry. The bank did not have numbers readily available.
Despite Tillie’s success, McBrayer said that the bank cannot get more than 50% of its 200,000 card holders to use ATMs. “It frustrates you a little bit,” he said. “We’re now just concluding some widespread research on the half who do not use it.”
In October, 1984, McBrayer’s bank was one of 12 in Georgia that began operating an automatic teller network. He said the new network is a big reason for the bank’s wanting to make Tillie more popular.
Even a personalized teller probably would not appeal to Nato Williams of Northridge, who showed up to wait on line at Independence Bank after Tom Pearce had left on Friday. A short, jovial woman, the 45-year-old secretary says she finds ATMs “cold and not friendly.”
Pulling the ATM card from her purse, she said she had not used it in the two years she has carried it. She said sweepstakes probably would not convert her, nor would the possibility of saving a little money using the machine. “I like to stand on line and talk to everybody,” she said. “I like to be close to people.” Would she ever try the machine? “Maybe someday I’ll get curious,” she said, as she stepped up to a teller who had just come free.
