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Case 4: Pacific National Bank
Pacific National Bank is a medium-sized bank with 21 branches. Until very recently, Pacific did not operate its own automatic teller machines (ATMs); instead, it relied on an outside vendor to operate these. Ninety percent of the ATM customers obtained cash advances with non-Pacific credit cards, so the ATMs did little to directly improve Pacific’s own banking business. Operations Vice President Maria Perez wants to change that, by having Pacific offer a broader mix of banking services with its own machines tied into its own data-processing network.
The industry consensus is that the ATM appeals to customers in much the same way as the supermarket express line: it minimizes the amount of waiting. But for Pacific, the 24-hour ATM would also have the broader appeal of providing essential banking services at all hours, reaching a segment of the market not currently served. Historically, customers who find standard banking hours inconvenient have been lost to Pacific, so the ATM will increase the bank’s market share.
Besides attracting more customers and servicing existing customers better, the ATM operation should offer substantial cost advantages. Fewer human tellers would be required for the same volume of transactions as before. The per transaction cost of the machine, which does not need human attention for restocking and maintenance, should be substantially less. But even if that were not so, its 24-hour readiness would be extremely expensive to duplicate with human tellers, who would have to be given extra protection for dangerous late-night work.
Ms. Perez selected the Greenhills office as the test branch for a captive ATM. Customers from that branch were recruited to sign up for a Pacific ATM card. All residents within the neighboring zip codes were offered an incentive to open free checking accounts at Pacific when they also signed up for the card. Once a critical mass of ATM card holders was
Pacific National Bank is a medium-sized bank with 21 branches. Until very recently, Pacific did not operate its own automatic teller machines (ATMs); instead, it relied on an outside vendor to operate these. Ninety percent of the ATM customers obtained cash advances with non-Pacific credit cards, so the ATMs did little to directly improve Pacific’s own banking business. Operations Vice President Maria Perez wants to change that, by having Pacific offer a broader mix of banking services with its own machines tied into its own data-processing network.
The industry consensus is that the ATM appeals to customers in much the same way as the supermarket express line: it minimizes the amount of waiting. But for Pacific, the 24-hour ATM would also have the broader appeal of providing essential banking services at all hours, reaching a segment of the market not currently served. Historically, customers who find standard banking hours inconvenient have been lost to Pacific, so the ATM will increase the bank’s market share.
Besides attracting more customers and servicing existing customers better, the ATM operation should offer substantial cost advantages. Fewer human tellers would be required for the same volume of transactions as before. The per transaction cost of the machine, which does not need human attention for restocking and maintenance, should be substantially less. But even if that were not so, its 24-hour readiness would be extremely expensive to duplicate with human tellers, who would have to be given extra protection for dangerous late-night work.
Ms. Perez selected the Greenhills office as the test branch for a captive ATM. Customers from that branch were recruited to sign up for a Pacific ATM card. All residents within the neighboring zip codes were offered an incentive to open free checking accounts at Pacific when they also signed up for the card. Once a critical mass of ATM card holders was