For the past decade or so, most credit unions have relied upon one of two things to forecast branch volume for scheduling purposes-industry averages or tradition (sometimes with a little historical information thrown in).
Despite the wide availability of business intelligence (BI) software that can harvest core processor transaction data and identify and forecast high and low volume periods for better scheduling, CUs continue with outdated methods to their financial peril. In fact, a recent study by Celent estimates that only 3% of North American financial institutions use these types of solutions.
The true labor cost for staff performing financial transactions is often hidden in the larger picture of the overall institution labor expense. And, precisely because it is so difficult to prepare meaningful performance analysis monthly reports, many executives have no idea how much each teller transaction costs them in labor, or how much they could save if they achieved modest productivity improvements. Even when evidence from other credit unions proves the ROI, they may often prefer to stay within their comfort zone, doing "what's always worked."
That strategy may have succeeded for the past decade, but its value is rapidly eroding. In fact, I predict CUs that do not optimally schedule branch staff may realize substantial losses or be forced to close branches. Conversely, those that embrace the efficiencies available through BI technology can transition to a leaner, more profitable model.
The fire in the room that's setting off the alarm, as you may have guessed, is the ever-increasing adoption of online banking and other self-directed delivery channels. However, even if you are aware of this massive paradigm shift, you may not have seen a total picture of its impact.
In 2005, financial institutions heard early inklings of trouble when research group Pew Internet & American Life reported that online banking had become the fastest-growing Internet activity in the U.S. from 2000 to year-end 2004. During this time, 53 million Americans used some online banking service. That compared with 14 million Americans in 2000.
A Drop In The Bucket
Those numbers are a drop in the bucket to what we are seeing today. In late 2011, research firm Ipsos Public Affairs announced that 62% of all Americans prefer the Internet as their primary means of financial institution access-nearly double from the year before.
Even more telling: the popularity of Internet banking among members 55 and older, which surged as well. Fifty-seven percent preferred banking online in 2011, compared to 20% in 2010. This is the first time that a majority of older members listed online banking as their favorite method of financial transaction processing.
Other studies indicate that members are accessing more services online, from opening new accounts to initiating mortgage applications. And don't forget retailers, who are selling a larger portion of their goods online, as well. Forrester Research announced in March 2012 that it expects online purchases by U.S. consumers to increase 62% between 2012 and 2016 to $327 billion. Less money physically placed in retailers' hands means fewer trips to the branch, as well.
This frenzy of internet activity over the years has led to a gradual decline in year-over-year volumes at the branches. It is inevitable that branches relying on industry averages or historic calculations from a year-or even a quarter-ago will not be able to forecast and schedule as accurately as possible. Those performing "intuition" scheduling are in even worse shape.
Now that you've heard how technology can impact your branches, let's look at how it can help them. In late 2011, we released a Teller Workforce Utilization Study that was a comparative analysis of productivity and workforce utilization among 2,000 financial services branches in the U.S. (both CUs and banks). The study uncovered some startling figures.
In branches with poor schedule optimization, tellers were spending twice the amount of time (36%) in non-transaction-based, non-member-facing activities compared to their counterparts in top-performing branches (18%).
What's Behind Productivity Loss
The activities that underpinned this massive productivity loss were myriad, from tellers performing too many non-volume activities to them standing around and waiting for work. In all cases, the root cause of the problem was inefficient scheduling.
More importantly for the bottom line, when CUs invest in branch scheduling and reporting software and then use its BI to eliminate over-staffing, they can achieve dramatic increases in teller productivity. In the case, at the 12 location IH Mississippi Valley Credit Union in Illinois, average teller transactions rose from 16.9 per processing hour to 23.6 per hour after they implemented a workforce analysis system. That's a productivity increase of nearly 40%. IHMVCU also realized a 90% drop in excess labor costs, or a $50,000 monthly savings, in the first two years after adopting the technology.
There are many valid reasons to make teller scheduling more efficient, including tightening budgets due to economic woes and increased expenses caused by new governmental regulations. However, there's never been a time when "the way we've always done it" has so clearly become out of sync with present reality. By embracing transaction analysis technologies and using the resulting BI to achieve optimal scheduling and service, CUs can extend the viability and efficiency of their branch network.
W. Michael Scott is CEO of Financial Management Solutions, Inc. (FMSI). For info: www.fmsi.com or (877) 887-3022.