Mobile Deposit Combines the Old and New in Bank Technology

Remote deposit capture (RDC), long tied to the PC and desktop scanner, has arrived at its ultimate destination -- anywhere, anytime check deposits through popular mobile banking capabilities and smartphones. By combining powerful technology trends and strong consumer demand with a traditional banking process, mobile deposit enables financial institutions banks to retain customers, prevent the fragmentation of customers’ banking relationships and, ultimately, forever change the bank’s relationship with its customers.

In every area of their business, financial institutions must find ways to provide more and better service while reducing operating costs. New technologies have always been the answer to that challenge, and during the last few years, mobile RDC has been in the spotlight. Advances in smartphone development and the advent of tablet banking have introduced millions of new banking devices to the marketplace. These devices are smaller and more portable, enabling bank customers to maintain their banking relationships anytime, anywhere -- with just a pocket-sized device. Representing the intersection of two very powerful banking trends – mobile banking and remote deposit capture – mobile deposit offers a cutting-edge way to manage a very traditional banking process.

A 2012 Javelin report found that mobile check deposits can cost the bank as little as four cents per check, while traditional branch-based deposits cost between 75 cents and three dollars per deposit. Financial institutions will soon be able to monetize mobile RDC capabilities, especially for small business customers, and may even be equipped to provide value-added reporting to determine mobile deposit’s true return on investment.

Fiserv research shows that four out of five financial institutions offer RDC services and more than 40 percent of banking customers would change their financial institution to get mobile RDC.

For generations, the paper check was by far the most commonly used non-cash payment method for businesses and consumers alike. In recent years, most of the conversation around checks has been about their impending demise as consumers embraced cards, online banking and, more recently, smartphones and tablet apps for their banking needs. Despite the rush to mobile banking, checks are not going away. Checks are still an essential part of our payment system, representing about one-fifth of all non-cash payments and nearly half the total value of non-cash payments. This amounted to more than $30 trillion in payments in 2010, according to the Federal Reserve. This high level of check-writing activity can be attributed mostly to business-to-business transactions.

Mobile Deposit for Small Businesses

Small businesses still write and receive millions of checks each year, making this market a significant and lucrative opportunity in which to expand mobile deposit services. Many businesses do not yet use RDC services of any kind but the near-universal presence of smartphones, and their proficiency as a deposit device, suggests that banks should move quickly to take advantage of this opening to pursue more widespread mobile deposit adoption. Banks leading the way in mobile deposit typically deliver their services to on-the-go service businesses, such as home repair providers, babysitters, landscapers and catering companies. Many receptive customers also have needs tied to microbusinesses or small nonprofit ventures, such as a sports team, church group or garage sales.

Security the Key

It’s only natural for financial institutions to be concerned about fraud potential when considering new technology. Banks must carefully consider any possible risks and strategically implement all necessary precautions. The good news is that fraud losses related to remote deposit are remarkably low, with more than 90 percent of institutions suffering no losses attributable to merchant, consumer and mobile remote deposit.

Careful risk mitigation will include several key common-sense practices. First, many banks restrict mobile deposit eligibility to established customers with an existing six- to 12-month relationship with the financial institution. Secondly, the bank must carefully track changes in deposit behavior, as atypical amounts and discrepancies in deposit trends are often red flags. Finally, daily mobile deposits are often limited to $5,000 or less and implement a robust fraud detection system that can identify duplicate deposits across multiple capture channels.

Any comprehensive mobile banking portfolio must include mobile deposit capabilities because mobile deposit offers a high degree of “stickiness” -- the capabilities help build loyalty and boost retention. To serve customers and small businesses, financial institutions must offer mobile RDC now, because other unregulated, non-financial firms already do.

Regardless of size, a bank that takes advantage of its unique market position to increase mobile deposit integration will reap the rewards of increased customer retention, continued deposit growth and transformed relationships with its customer base No longer content to use mobile banking to simply get information, consumers and small businesses are now looking to complete the same tasks and transactions they once performed only at a branch or online. Banks that deliver these capabilities, including mobile deposit integration, will gain a clear advantage.

Gary Brand is Director, Source Capture Solutions,Fiserv