|RIP DESKTOP RDC Mobile remote deposit capture poised to take over|
Mobile remote deposit capture is destined for mainstream consumer adoption, while its desktop cousin will be shunned by most banks, according to study by Celent.
"Widespread adoption of mobile RDC is a given, but it won't necessarily be easy," says Bob Meara, senior analyst with Celent's Banking Group and author of the report. "Balancing regulatory compliance, risk management, and growing consumer demand will challenge many institutions."
Remote deposit capture began as a product offered to business clients using specialized capture devices. The past few years have seen several hundred financial institutions, mostly credit unions, offering consumer capture using devices consumers already own, thus eliminating the cost of providing and supporting scanners. RDC thus has become a viable self-service deposit channel; that is, for anyone with a scanner, a demographic that excludes most U.S. households but includes virtually all small businesses. More popular still is mobile RDC, which invites the use of smartphones, running a stand-alone application or as part of a broader mobile banking solution.
According to the report featuring results of a Celent survey, 80% of U.S. financial institutions are planning to or arevconsidering offering mobile RDC. Celent expects the number of financial institutions offering mobile RDC to double over the next year to nearly 1,000 banks and credit unions. Desktop RDC using scanners or multifunction devices will be offered primarily to small businesses, as financial institutions increasingly view mobile as the platform of choice for consumers.
The other challenge with mobile RDC may result from its success with consumers and small businesses. 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. Mobile RDC may hasten branch transformation and many banks aren't ready for that, Celent says.
Leveraging self-service channels is an established strategy, but not in the realm of check deposits. With consumer RDC, financial institutions have a means of reducing transactional activity in their branch networks.
· Although nascent, consumer RDC, using both desktop scanning and mobile approaches, is growing rapidly. Beginning with USAA in 2006 and over 500 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 no doubt had a significant influence.
· Four consecutive annual surveys conducted by Celent show rapidly growing adoption and intent to offer mobile RDC in particular. Financial institutions are offering 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. With mobile RDC, most institutions walk before they run.
· There has been a growing consideration for mobile RDC which has finally given way to significant product launch activity over the past year. Meanwhile, interest in consumer desktop RDC has sharply declined over the past two years. Trends in surveyed attitudes among financial institutions do not bode well for the desktop model. Instead, for most institutions, mobile RDC will be theconsumer RDC solution.
· Financial institution-sponsored 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 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 both desktop TWAIN-compatible scanners that most small businesses already have in their offices and mobile RDC alternatives. 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 small business RDC are being planned or considered by roughly half of the financial institutions surveyed in September 2012. Even more (70%) are planning or considering a mobile RDC approach to serve consumers and small businesses. Assuming this occurs, banks will lag nonbank providers, such as PayPal, that already offer no-cost RDC to small businesses. A 2012 Celent survey of small businesses suggests that as many as 27% of small- and medium-sized businesses with both online and brick-and-mortar delivery channels already use RDC-a much higher adoption rate than banks think.
· 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 2012 and lengthening implementation queues for these products.
· 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 (and in many cases, displacing) 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 stand-alone solutions because doing so gets them to market faster than a solution that is integrated with mobile banking.
Celent expects the growing acceptance of consumer capture to continue alongside a general calm related to RDC risk. The fear, uncertainty, and doubt ushered in by the FFIEC guidance is subsiding as banks get audits behind them and experience low levels of RDC-inflicted losses. Then, observing a growing number of competitive initiatives, more financial institutions will investigate and ultimately deploy solutions. This will occur as banks continue to struggle with branch channel profitability. In this context, a minority of banks will grasp RDC as a self-service channel capable of displacing significant branch transactions at lower cost, and they will act accordingly.
The idea of RDC as a self-service deposit-gathering mechanism rather than primarily a source of fee revenue is key. Celent observes few financial institutions embracing the value of RDC (along with image ATMs) as a means of significantly reducing branch channel operating costs. With abundant evidence of the growing popularity of self-service channels, financial institutions that fail to push the RDC envelope will be at a significant disadvantage.
A rapidly growing number of financial institutions will be drawn to the value consumer RDC provides their retail and business banking customers. In an unfortunate climate where banks can do nothing right in the eyes of the press, consumer RDC ought to be a no-brainer.
This report draws on results from a July survey of 15 solution providers and a September online survey that drew responses from 225 financial institutions.
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