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Mobile RDC: What’s the hold up?

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11 August 2009
Bob Meara
Now that the dust has settled on remote deposit capture, RDC, for commercial customers, a relatively small number of financial institutions are looking towards measured expansion of the technology to include wealth management, micro business and private banking clients. Some even contemplate making RDC available to a broad consumer base using suitably equipped mobile phones as the image capture device (a.k.a. Mobile RDC). Yet compared to the meteoric adoption of commercial RDC, this subsequent market expansion is moving at a snails pace. What’s the hold up? More specifically, beyond a handful of financial institution pilots, why have so few banks launched initiatives? The most commonly cited adoption barrier is risk. In particular, some argue, the risk of users depositing the same item more than once. In addition, the FFIEC guidance, Risk Management of Remote Deposit Capture, January 2009, admonishes financial institutions to undertake careful risk mitigation and controls when deploying RDC, including determining which customers are suitable for RDC, training them appropriately, and developing appropriate systems monitoring and reporting capability. Some financial institutions have concluded that attaining all these requirements amidst serving a customer base as potentially vast as the consumer or small business market is untenable – or at least more trouble than it might be worth. Given the state of things in financial services, who could fault a financial institution for being risk adverse? Yet, something tells me that risk is only part of the story – or worse, a convenient justification for inaction. The larger challenge for financial institutions contemplating adopting mobile RDC is what to do with all their branches. Over eighteen months ago, Celent surveyed over 150 commercial RDC deploying financial institutions and found that even then, in RDC’s formative years, a third of banks experienced a significant reduction in branch transaction volume as a direct result of RDC (Figure 1). Since that survey fielded, total RDC client adoption has more than doubled, displacing more branch traffic. A significant small business or consumer RDC initiative would have a more profound impact.

Figure 1 – RDC’s Impact on Branch Traffic, December 2007

[caption id="attachment_776" align="aligncenter" width="629" caption="Source: Celent FI survey, December 2007, n=157"]Source: Celent FI survey, December 2007, n=157[/caption] We’re not prophesying the end of branch banking. Rather, we're suggesting that some amount of branch infrastructure reengineering is a likely prerequisite to enjoying a respectable return on investment in mobile RDC. Many banks already are grappling with declining branch profitability. Fixing that problem will likely be costly and protracted. Branch closures may stop the hemorrhaging, but systemic redesign is needed. In this context, a successful consumer RDC launch would exacerbate the pain already being felt and hasten the need for the really big task of branch redesign. This makes FFIEC compliance looks easy by comparison. RDC (mobile or otherwise) is, after all, a customer self-service channel. Unlike other self-service channels that have largely added customer transactions (yet with great benefit), RDC eliminates trips to the branch by definition. Check transactions remain the #1 reason banks have tellers. Mobile/consumer RDC could change that in a big way. That may be the big reason for hesitation at some banks.

Comments

  • I have spoken to many banks and credit unions about mobile RDC. There's a genuine interest in offering the feature, but most are just not ready because they haven't got mobile figured out in general.

    It's difficult for a bank without mobile banking to jump directly to mobile RDC because of the risk, perceived or otherwise. Banks with existing mobile banking implementations generally are trying get their arms around what they have. Many banks consider their initial mobile banking implementations to essentially be a pilot, a basic first step.

    In general, banks are still wrestling with developing a mobile strategy. Mobile RDC has a bright future in the U.S. and is likely to pick up steam as the economy improves and efforts like those at USAA demonstrate the clear benefits.

  • Bob,
    With your contacts among the bankers, can you provide some information on the types of criteria the banks apply before granting access to consumer RDC, especially, phone capture? I am sure the bankers will not want to be very specific, but I think it would be good to provide the industry and the general public with knowledge that some criteria will be applied and it is not simply a matter of having an iPhone and then I can deposit my checks. Thanks

  • Bill ... excellent question. I'd be interested in any information Bob can share from his banker contacts, too. From what I've learned about USAA's use of mobile capture ... it is being offered to their loan and insurance members ... those that have already essentially gone through a credit check with them.

    Bob ... another question ... how far away are we from mobile payment adoption? Why accept a check when you can instead look for a P2P or mobile to mobile option? Are we looking at 2-3 years or 5 years or longer?

  • Seems to me, it's too early to cite any patterns in mobile RDC user eligibility requirements. For consumer capture (with desktop scanners) requirements vary. Minimally, some deposit history with the FI.

    I appreciate Chris's question - why all this technology around paper checks? Early results from consumer capture are showing surprizing average dollar amounts - between $800 and $1,200. Clearly, users are depositing a healthy number of pay checks. Not all P2P items in other words. Direct deposit is not a new invention

  • I suspect many of these checks are rent checks. iPhone owners match the profile of a landlord. Landlords often don't have a lot of checks to deposit, but they need to get them in quick for cash flow and they have stuff to do, other than drive to the bank.

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