Confronting the labor challenge with an “As a service” solution

“HELP WANTED”—It’s been one of the most inescapable signs of the past year, a challenge for financial institutions and the economy in general. While war, inflation and rising interest rates have taken front-page headlines, the persistent labor challenge continues to hit the financial services industry hard.

The labor challenge emerges from two interrelated problems—the ever-increasing cost of labor and the scarcity of those available to work. While the underlying shortage of labor has several driving factors, many of the problems began with the COVID pandemic. Stimulus payments and other inducements led to early retirements, immigration policies tightened borders and working-age adults moved from major cities as companies offered remote working arrangements.

The US isn't the only country affected. In the UK, two in five employers (42%) have hard-to-fill vacancies according to the Chartered Institute of Personnel and Development (CIPD). Australia is looking at a shortfall of almost 200,000 workers by 2050, according to a report from the former Commonwealth Government. Eurostat reports that across the European Union in 2021, a whopping 35.9% of people were not working.

This labor market tightness makes it harder to fill jobs, while also leading job seekers to demand higher wages. Per the Atlanta Fed’s Wage Growth Tracker, US wage growth hit 6.7% in August 2022 and stood at 6.1% in December 2022, the highest wage growth since 1997 and more than double the wage growth of 3.0% in May 2021. Persistent global inflation has induced workers to seek higher wages as well.

From 2020 to 2022 nearly three million workers left the workforce in the United States according to the US Chamber of Commerce’s America Works Data Center.

Against this macro economic background, there are consistent competitors for labor. As just one example of the type of job opportunity that might compete for teller talent, Starbucks baristas in the US can earn up to $23 per hour. Others are choosing alternative work.

A survey from Higher Visibility found that a quarter of Gen Z individuals wanted to become social media influencers. In today’s market, there are many ways to earn a living.

Delivering everyday banking through digital channels has dramatically altered the retail landscape. For many financial institutions, the answer comes not from finding elusive workers but from changing how service is delivered.

Today, even a new account opening can happen on a mobile device in minutes. But the nature of the digital revolution changes dramatically with physical interactions, where most financial institutions still rely on a combination of tellers and ATMs in their branches, each of which introduces labor challenges.

Overcoming the challenges

ATMs and ITMs (interactive teller machines) can reduce the number of tellers required at the branch and free staff to pursue deeper customer engagements beyond routine transactions.

The ITM can further streamline the teller line, reducing the need for in-person tellers. Instead, remote tellers provide full-service, face-to-face banking through the ITM. The amount of time per teller spent serving clients is maximized by consolidating tellers in a central location from which they can service ITMs across the branch estate, increasing productivity and reducing per- branch labor needs.

In an ATM as a Service model, the financial institution provides the location while the service provider does the rest, supplying ATM hardware and software, cash management, maintenance, processing and service. This model frees up staff—front-line staff from managing ATM cash loads and daily maintenance and IT and technical staff to shift focus from maintaining ATMs to digital banking or other value-add channels. An ATM as a Service program results in long-term labor benefits because the service provider manages the entire program.

While ATM as a Service addresses branch needs, access to a third-party ATM network can help financial institutions rethink the size and structure of the branch network entirely. Networks, like Allpoint in the US and Cashzone in the UK, provide access to tens of thousands of ATMs for surcharge-free withdrawals. In the case of Allpoint, thousands more deposit-capable ATMs offer cash-in to provide a wider range of banking options. Institutions can offload transaction volume from the branch onto the network and shift branch focus onto value-added services like wealth management and high-value loans. Meanwhile, the ATM network takes on more of the role of an everyday physical banking channel, with obvious labor benefits to teller lines, ATM management needs and branch staffing.

The labor challenges facing financial services aren’t going away soon. Pivoting to an “As a Service” strategy for the ATM/ITM channel, at the branch and beyond, can help alleviate labor concerns today and in the future, while expanding service availability and driving improvements in customer satisfaction.