Mobile check capture could help banks usher in mobile 2.0

The ability to capture an image of check with iPhone or Android smart phones and complete a check deposit anytime, anywhere is having an impact out of proportion to its likely potential.

Few banks offered the service as 2011 dawned, but one of them happens to be Chase Bank, with its legions of blue octagons dominating the Northeast and beyond. The New York giant has been actively advertising the service, but more generally interest in mobile RDC spiked in the second half of 2010.

Mobile overall definitely seems a channel with an unstoppable growth curve. Javelin predicts there will be 85 million U.S. mobile banking customers by 2013, and TowerGroup projects a compound annual growth rate of 51.8%, faster than any other channel in the history of banking.

As for mobile RDC specifically, the service is certainly out of the shadows. “Chase obviously believes the service has mass appeal, or it would not have spent the money it did on an advertising campaign,” says Bob Meara, a senior analyst with Celent’s banking group.

Some might dismiss the service as gimmicky, but many experts, including Meara, believe it will see wider adoption next year even as remote deposit capture overall plateaus. 

Where can you find it?
In addition to Chase, the service is currently offered commercially by pioneer USAA, which introduced mobile RDC in 2009. Now, the branchless savings institution claims a processing level of 1.5 million checks worth $930 million—or one third of USAA’s overall consumer remote deposit capture volume.

Mobile RDC will soon be available at $703.3 million assets Conestoga Bank, Chester Springs, Pa., and has been launched at a handful of credit unions.

Why did the Conestoga opt to go for a service that most predict big banks will adopt first? “We believe the service redefines the word ‘convenience’,” says Lori Adamski, chief operational officer. “Using a scanner is fine for business primarily run out of offices but we were thinking of landscapers and other entrepreneurs on the go who can be saved a trip to the branch, yet stay on top of business cashflows.” Consumers, Adamski believes, will also adore the service, as everybody knows checks are still with us. Currently, mobile RDC is being piloted by bank employees, family, and friends. “Everyone has said the service is easy to use,” says Adamski. The product is supported by a software-as-a-service (SAAS) offering from J&B Software.

Not big, but useful
True, only 27% of community banks offer any mobile banking capability today, according to a survey of 687 community bankers done by San Francisco-based Banc Investment Group last spring. Yet many bankers have indicated that, in planning for demographic shifts and changing consumer habits in the years ahead, mobile will become strategically critical.

In ABA BJ’s own reporting, the response was mixed. “We are keeping a close watch on mobile RDC to see if consumers see real value in the offering,” says Greg Jacobi, senior vice-president of e-banking at $17.8 billion assets Webster Bank, Providence, R.I.  “As it stands today, our view is that Consumer RDC will not drive a significant number of transactions away from current channels. It will also not do anything to reverse the trends that younger consumers have created—the decline of using checks as a preferred payment method,” Jacobi explains. “However, checks still exist and mobile RDC can be a valuable channel for consumers that have a one-off need to deal with that cumbersome method of payment, saving them the hassle of finding an ATM or branch.”

Though not overly excited about mobile RDC, Jacobi is seeing an uptick in mobile banking usage. “Before we even launched our mobile offering we had a large number of users accessing our full website from their mobile devices,” he says. “Our mobile strategy has been all about responding to consumer demand, it is not about trying to create a new channel or drive transactions elsewhere. We simply want to provide superior service, on all of our channels.”

Who offers the app?
According to Banc Investment Group, 36% of the community banks offering mobile banking use Fiserv’s Mobile Money, 16% said they used FIS/Metavante’s Mobile Payment Solutions, and 10% use Clairmail’s Intelligent Payment Solution.

Meanwhile, several vendors have indicated that interest for their mobile capture software is ratcheting up. Finishing strongly in 2010 was Mitek Systems. Its offering, co-developed with mFoundry and introduced in 2009, is called ImageNet Mobile Deposit. The company now additionally distributes the service through a partnership with Jack Henry & Associates and other core technology providers, including Fiserv, FIS/Metavante, and Wausau Financial. Also making headway is Canadian company RDM with Simply Deposit Mobile, and  VSoft Corp., which offers its Agile Mobile Capture.

Pete Daffern, chief executive officer of Clairmail, headquartered in San Rafael, Calif., has written in various industry trades that the industry is poised between Mobile 1.0 and the next step, that is, shifting beyond their introductory offerings into a more powerful transactional system. The next phase, Daffern believes, will include coordination of business workflow across many channels and more transactional work on devices.

RDC underscores mobile utility
Why is such a narrow capability driving so much interest? “There’s certainly a coolness factor to it,” admits Mark Schwanhausser, senior research analyst, multichannel financial services, Javelin Strategy & Research. “There are still enough checks in the system to make the service attractive to tech savvy Gen Xers and Gen Y mobile enthusiasts,” he predicts. 

Ron Shevlin senior analyst, retail banking, with Boston-based Aite agrees. Both analysts think when the novelty of phone-based scanning wears thin, the utility of the service will continue to underscore the message that mobile banking can be truly transactional, as useful as online banking, and a safe way to avoid branch lines for routine services.

For banks that are able to popularize the service, mobile RDC can offer two key benefits: cost reduction and reach to new consumers. This would be especially appealing to banks with smaller branch networks in a limited region, in that they can attract new out-of-town or even defected customers who would presumably be less branch dependent. Banks that go with mobile RDC can go with a “branch-lite” strategy as they move into new regions. The service can also help a bank with any paperless initiative, which helps with compliance, risk management, and operational efficiencies.

“A green message could also appeal to a niche segment,” says Celent’s Bob Meara.

Historically, Meara reminds ABA BJ, a good percentage of self-service transactions have been additive. “Previous efforts at self service haven’t siphoned off all that many transactions from the branch networks. As a result, a significant majority of teller transactions involve checks.”

Remote deposit capture in all forms, including mobile, provides a unique ability to directly prune down branch transaction volumes. “There hasn’t been a self-service way to deposit checks with the exception of ATMs,” the analyst points out. Meara indicates that he also sees potential interest in the small-office, home-office market. 

A natural for Gen Y
The physical process of mobile remote check capture, which bridges real and digital realms, can cause customers to rethink the case for mobile banking, especially those who may have been indifferent to the charms of mobile 1.0. Both Schwanhausser and Shevlin agree that the mobile banking usage has mostly been limited to alerts and balance checking, but a niche service such as scanning a paper check is intuitive—and will be a draw.

“The phone is acting as a scanner; it doesn’t have to be explained,” says Shevlin.  

He thinks the service could be good for acquiring new customers, although he’s not certain if there is anything inherently sticky about it. “In terms of appealing to Gen Y, which does everything with mobile phones, it makes sense to offer the service,” says Shevlin. “Customers in this age group are also newer to banks and banking, and haven’t had the chance to become cynical about fees or business practices.”

Shevlin says his company’s research shows consumers continue to use various channels for bill payment and have interest in person-to-person payments—so the bank with fullest array of offerings will probably win large in the long run. Also, prepaid cards are seeing more traction for rebates, rewards, and government payments.

Still, there are enough paper checks in the system to warrant adding the transactional feature to smart phones. •

 

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