Manifest Destiny: Small Business Remote Deposit Capture

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4 March 2008


Checks are central to small business finances and will remain so for the foreseeable future. However, meaningful adoption of RDC solutions by small businesses is inevitable. Highly predictable market forces will produce escalating competition as more deployers enter the market, driving down solution costs and spurring adoption.

Like the US North American expansion in the nineteenth century, remote deposit capture (RDC) is rapidly gaining territory. But just how far and how fast will it expand? In a new report, , based on three separate quantitative surveys, Celent concludes that broad-based adoption by small and micro businesses (SMBs) is indeed the manifest destiny for RDC, and will come about in large measure over the next three years. Banks with large branch footprints have long had a stranglehold on small business financial services. For those willing to think and act differently, remote deposit capture will change that.

Although as many as 60% of US financial institutions have remote deposit solutions, two-thirds offer the same product to large and small businesses alike. But 30% of retail banks are planning separate remote deposit initiatives aimed specifically at small businesses. Historically, such initiatives have been rare, due to high solution cost and back office infrastructures that weren't ready to efficiently process incoming check images. This trend should continue as a number of factors align to foster significant small business adoption through simultaneously improving client demand and eroding historic financial institution barriers.

“Two things jump out of this research,” says Bob Meara, author of the report and senior analyst with Celent's Banking group. “The first is just how important checks are to small businesses. In our survey, checks represent 75% or more of total receivables for over two-thirds of small businesses. Second is the terrific opportunity for remote deposit among the smallest businesses, 20 million of them with annual revenues of less than US$1 million. Banks haven't focused there yet, but new, low-cost scanners coupled with thin client applications will open up a whole new market for banks.”

This report begins by suggesting the manifest opportunity small business RDC represents as a vehicle for low cost deposit growth, particularly given today's challenging lending and interest rate picture. The report also presents an overview of the small business landscape, highlighting the significant opportunity among businesses with revenues of less than US$1 million.