|Consumer RDC set to take off|
Growth in self-service channel preferences, competitive pressures, and relentless cost reduction demands are vaulting remote deposit capture into the consumer mainstream. Mobile RDC is taking center stage, with 80% of surveyed financial institutions planning or considering a solution, according to a report by Celent.
“The real challenge with self-service deposits may be the transformation required as transactions move out of the branch,” says Bob Meara, senior analyst with Celent’s Banking group and author of the report. “Self-service deposits are at odds with the pervasive cross-selling culture at most banks. Reduced branch traffic presents a sales challenge, but deposit-related foot traffic comes at a significant cost—one that U.S. banks may no longer be able to afford,” he adds. “Mobile RDC may be the best idea yet to hasten the branch transformation we all know to be inevitable.”
Although nascent, consumer RDC, using both desktop scanning and smartphone approaches, is destined to grow rapidly. Beginning with USAA in 2006 and more than 400 financial institutions since, attitudes toward offering consumers RDC capability have markedly changed. In part, the highly advertised launch of Chase Mobile Deposit in August 2010 may have had a significant influence.
Three consecutive annual surveys conducted by Celent show a doubling in planned adoption of mobile RDC from 26% of surveyed financial institutions planning or considering a solution in August 2009 to 51% in September 2010 and another near doubling to 66% in 2011.
Financial institutions will offer mobile RDC to both consumers and businesses. Celent expects multiple initiatives to be announced in the coming months, but sales and marketing efforts will be slow and cautious as banks balance business objectives and compliance risk.
RDC-related product launch efforts over the past year were minimal because most financial institutions were consumed by compliance activity spurred by the FFIEC Guidance on RDC Risk published in January 2009, more than four years after RDC's debut. Many financial institutions have the view that consumer RDC carries considerable compliance risk because the guidance is largely silent on consumer RDC specifically, and because the large number of end users make acting upon other suggestions in the guidance untenable.
Small business RDC client adoption remained unremarkable over the past year. For the most part, financial institutions (banks in particular) continue to offer small business RDC products that require specialized check scanners that must be deployed by financial institutions and often purchased by users. The difficult economy combined with rather stiff monthly fees associated with many RDC products have squelched demand.
The coming year will see a step change in the market, however, as financial institutions offer ultra-low cost alternatives to small businesses using TWAIN-compatible scanners that most small businesses already have in their offices. The benefit of this approach is that it takes deployers out of the scanner business, substantially reducing total solution cost. Once considered heretical for their lack of magnetic ink character recognition, TWAIN-compatible scanners for RDC are being planned or considered by roughly half of the financial institutions Celent surveyed in September 2011. Even more are planning or considering a mobile RDC approach to serve consumers and small businesses.
With FFIEC-related projects largely completed, many financial institutions are turning their attention to serving customers. This is reflected in an upsurge in vendor contracts through 2011 and lengthening implementation queues for these products. Other factors will result in mainstream use of consumer RDC over the next few years:
• Desktop TWAIN scanners produce a step change reduction in solution cost (and resulting pricing) that will, finally, make RDC broadly viable for small business and consumer segments.
• Consumer RDC solutions have been adequately vetted to show that the technology is viable, with acceptable user experience and back office operational results.
• Most financial institutions have endured FFIEC RDC audits and lived to tell the tale. Sound risk management practices alongside modern vendor solutions result in acceptable risks.
• With large bank product launches, consumer awareness of RDC is on the rise, and every indication suggests it's a winner. Retail RDC appears to be finally going mainstream, although it is happening in a slow and methodical manner.
• Mobile is all the rage, with many financial institutions placing mobile RDC projects ahead of desktop TWAIN. Some are launching mobile RDC ahead of mobile banking itself in an effort to secure and enjoy early-mover advantage. Others are launching standalone solutions because doing so gets them to market faster than a solution that is integrated with mobile banking.
For this report, Celent surveyed 12 distributed capture vendors and conducted telephone interviews among other solution providers, aggregators, hardware manufacturers, and financial institutions to obtain an accurate state of the industry as well as the dynamics shaping the future. The report also draws on a Web-based survey conducted in September 2011, with 218 FIs responding. Three consecutive surveys, from 2009 to 2011, permit the analysis of trends over time rather than a static measure of FI plans and sentiments.
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