Why are banks deploying chipped tellers?

Since the onset of the Asian financial crisis in July 1997, banking institutions in the Northern Marianas were forced to tighten belts by trimming down manpower costs or even branch operations.

And while banks explore every available way of cutting down operational costs, Automated Teller Machines (ATMs) are definitely not likely to suffer the ax.

Government records recorded an increase in the number of ATMs installed by commercial banks operating in the CNMI since 1997 when the islands’ economy slowed down because of the Asian financial crisis.

At present, there are 19 on-site and off-site automated teller machines strategically deployed all throughout the CNMI.

While the figure appears smaller than the 150,000 ATMs deployed throughout the United States, economists say this is more than enough for an island of only about 60,000 people.

Analysts attribute the increasing number of ATMs to the brewing competition in the banking sector with 10 institutions providing full banking services in the islands. Banks are now forced to balance costs and client reach.

The Banking Division said the whole principle behind ATM is convenience for customers who may not have enough time to transact businesses like deposits and withdrawals during banking hours.

As ATMs reach out 24 hours a day to clients, banks also consider the system a very efficient way in cutting down on manpower expenses as one machine can virtually replace several tellers.

“If we can have an ATM, it can take the place of several tellers. Also, many customers are coming in at odd hours to get their money which keeps them out of the bank,” said Bank of Hawaii vice president and CNMI branches manager David P. Tollestrup in an earlier interview.

Bank executives admit that ATM transactions are cheaper to process than transactions involving human tellers. It normally costs banks an average of US$0.36 to transact through ATM, compared with US$1.06 through human tellers.

This is why banks continue to rationalize their deployment of ATMs to ensure they are located in areas where user traffic is heavy, which could mean more off-site ATMs for commercial centers in the CNMI.

The presence of more ATMs also helps the local economy because of its accessibility. Its strategic deployment helps in spurring continued spending among bank clients.

Consumers find ATMs so convenient that they engage in many more transactions than they used to. Commonwealth Development Authority (CDA) Board Chairman John S. Tenorio said ATMs provide a hassle-free and secured banking service.

Mr. Tenorio said ATMs are very accessible especially among busy people who may not have enough time to go to the bank and line up to deposit or withdraw to and from their account.

According to Mr. Tollestrup, there are some responsibilities in the part of the customers as far as securing their account like the utmost protection of the Personal Identification Number (PIN).

Depositors enjoy additional security because ATMs can actually identify persons who make the transactions with the machine since these are properly equipped with hidden cameras.

Business analysts have also stressed that the government should maintain a policy conducive to the physical expansion of financial institutions in the CNMI through branching out in order to sustain the sector’s growth.

Since last year, new automated teller machines in on-site and off-site locations such as restaurants, shopping centers and hotels have been installed by at least two of the 10 banks operating in the CNMI.

In 1998, the Bank of Saipan completed a series of in-house tests on its own ATM service which was initially linked with the Mari-Net, a regional shared network based in Guam.

According to Bank of Saipan chief executive officer Tomas B. Aldan, the brewing competition in the CNMI’s financial sector necessitated the bank’s move to come up with an ATM service.

However ATMs are costly to own and operate. A new ATM just off the production line costs between US$7,000 and US$50,000, depending upon features. Monthly operating costs average $1,000 to $1,500, depending upon the type of machine and the complexity of features.

Monthly operating expenses include: site rental, telecommunications, electricity, cash courier service, balancing and settling the books for each machine, transaction authorization and routing, daily deposit gathering, cost of cash in the machine, hardware maintenance, and signs and logo displays.

Nevertheless, banks deploy ATMs in off-site locations because customers are demanding more convenient access to their bank accounts through what bankers calls “chipped tellers.”