Mobile RDC and the Quest for Retail Banking Revenue

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12 December 2011
Bob Meara
We’ve all witnessed how difficult it has become for retail banking to dig itself out of its retrospectively misplaced devotion to free checking. The recent brouhaha over several banks’ attempt to recover lost debit card interchange through monthly fees gives testimony to just how challenging this new climate has become. After a decade of training consumers to expect retail banking services for free, banks are challenged with positioning products and services in a way that provides value to customers while effectively monetizing the bank’s capabilities. Said another way, banks did it to themselves – and they’re doing it again. In this context, I’m a bit perplexed at how quick banks are to leave money on the table. One particularly egregious example in my opinion is mobile RDC. Here we have a product that: • Resonates with consumers and businesses alike for its convenience and usefulness • Is offered by a small fraction of U.S. financial institutions at present, providing early-mover advantage in a largely undifferentiated mobile banking environment. • Is easily bundled with other services that appeal to highly attractive market segments. So early-mover banks must be enjoying revenue from mobile RDC, right? Of the one hundred plus financial institutions currently offering mobile RDC, I only know of several that are charging for consumer usage. This is in sharp contrast with P2P payments, for example, where the significant majority of institutions using solutions (ZashPay et. al.) for mobile P2P payments charge for the service. Some institutions may be proceeding under the belief that consumers simply wouldn’t be willing to pay a small fee in order to avoid a trip to the local (or non-local) branch. Heck, one can barely start an automobile for less than a buck with today’s fuel prices. But, Fiserv research conducted in 2010 suggests that a percentage of consumers would indeed willingly pay at least two bits per deposited check. Admittedly, this does not constitute a thorough analysis of mobile RDC price elasticity, but it does suggest banks may be missing an opportunity. Let’s look at two banks that are charging for Mobile RDC; First Tennessee and U.S. Bank. First Tennessee First Tennessee offers a full-featured mobile banking platform supporting Android, Blackberry and iOS equipped phones. First Tennessee Mobile Banking offers account transfers, bill pay (Mobile Bill Pay), ATM locator and Mobile Deposit. First Tennessee also offers SMS Text Banking and Mobile Web Browser with more limited capability. First Tennessee bundles Mobile Deposit into its Premier Checking product at no additional cost and Premier Checking customers are automatically eligible for Mobile Deposit. Premier Checking is free for those maintaining a $5,000 minimum balance. Otherwise it costs $9.00 per month. Brokerage customers are also eligible for Mobile Deposit at no additional cost. For other customers, First Tennessee is disclosing a $.99 per check fee, but is temporarily waiving that fee. Eligibility requirements for non Premier Checking or MAP customers aren’t disclosed on its web site. Instead, only eligible customers will see the Mobile Deposit option on their mobile banking app. Simple enough; if you see it, you can use it. U.S. Bank U.S. Bank Mobile Banking is a full-featured mobile banking app for Android, Blackberry and iOS equipped smart phones and is also available via browser (Mobile Web) with more limited capability. The applications offer bill pay, ATM locator, P2P payments (Pay A Person), transfers, real time alerts and mobile RDC (DepositPoint) on Android and iOS phones. To be eligible for DepositPoint, one must be a U.S. Bank Internet Banking customer with direct ownership in a U.S. Bank Checking or Savings account and have no more than two returned deposited items in the past 3 months. There is a $0.50 fee per deposited check. Both banks are positioning mobile RDC as a value added feature. U.S. Bank charges all users, while First Tennessee overtly bundles its application with premium accounts. Both are valid options that balance risk and reward. Most other banks are simply leaving money on the table.


  • At 25¢ per check, how much revenue are we talking about? How many check deposits does the average account holder make each month? Around our house, it's maybe one a month, or $3 per year.

  • Great question! Most FIs deploying mobile and consumer desktop RDC are seeing a mix of regular users (several deposits per month) intermixed with a larger number of occasional users. Additionally, a growing number of small businesses are keen to use RDC, and deposit activity among that segment can be significantly higher. Net revenue won't be extraordinary in most cases, but that's not my main point. Banks need to dig themselves out of the "everything is free" hole, and must learn how to successfully position financial services in a manner that invites monetization. Mobile RDC ought not be neglected in so doing.

  • If Banks are going to dig themselves out of that hole, why not choose products that actually produce substantial revenue? If we charge for every product we offer then the whole process is cyclical and we will go down the path of one bank that sees a competitive advantage to offer everything for free, and the whole industry is forced to follow suit to be competitive. We must pick and choose our battles carefully, especially in this time of high price sensitivity.

    Online and mobile users are some of the most profitable customers a bank can have. We want to do anything we can do to get all customers in these "sticky products." Charging for a checking account is one thing, because there are high operational costs associated. But charging for a mobile solution that takes transactions away from a cost center (branch) and into a solution that costs pennies on the dollar (mobile RDC)? I see mobile RDC as a way to drive operational efficiency, not as a way to squeeze a few hundred revenue dollars from my best customers.

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