Mobile Remote Deposit Capture: Putting a Price on Convenience

Banking customers increasingly see value in mobile remote deposit capture (RDC). In fact, in many cases, they would even change banks to get the service, according to the Mobile Financial Services Tracking Survey, a semiannual survey conducted by Boston-based consulting firm AlixPartners. At the end of 2011, 65 percent of the survey participants who indicated that they were "at least somewhat likely" to switch banks for mobile services said that the ability to deposit a check with their mobile devices would be the main reason for the switch — a 50 percent increase over the second-quarter 2011 survey results.

Banks are scrambling to meet this rapidly growing customer demand for mobile RDC. A study from Boston-based Celent, which collected information from 218 banks, as well as financial industry vendors and service providers, found that 80 percent of financial institutions are planning or considering a mobile RDC solution. But many banks have been slow to officially roll out a solution due to factors such as an increased focus on compliance and regulation, the study points out.

Until mobile RDC becomes more ubiquitous, banks that have rolled out a full-fledged offering hold a competitive advantage. Meanwhile, only a handful of big banks -- including JPMorgan Chase, PNC Bank, USAA and U.S. Bank -- and even fewer community banks and credit unions offer mobile RDC.

[For more on JPMorgan Chase's mobile strategy, check out our exclusive Q&A with Ravi Acharya, Chase's SVP and head of product management for online, mobile and social.]

Window of Opportunity for Fee Income

U.S. Bank introduced its DepositPoint Mobile RDC offering about a year ago in order to meet customer demand, according to Niti Badarinath, the Minneapolis-based bank's SVP and head of mobile banking. "We talked to our customers and they kept saying, 'Why can't I make deposits with my mobile phone?' " Badarinath relates. "We made a good bet early, and we're reaping the benefits now."

One of the benefits U.S. Bank (about $340 billion in assets) is realizing from its mobile RDC offering is revenue — the bank charges its customers a 50 cent fee per mobile deposit. Badarinath says the bank saw a "window of opportunity" to charge a fee, the result of a technology-driven competitive advantage combined with an unmet customer need. He adds that the bank is monitoring customer feedback very carefully and is studying whether the fee is affecting adoption. In addition, U.S. Bank is tracking transaction volume, transaction dollar amounts and the broadening of the adoption base, Badarinath notes.

Although he declines to share actual numbers, Badarinath says U.S. Bank's DepositPoint Mobile is doing very well on all counts. "All usage and adoption metrics have been trending in the right direction," he insists, adding that the application has garnered public and private praise. "We haven't seen any negative impact of the fee on adoption and usage."

Charging a fee for mobile RDC may seem like a gutsy move at a time when consumers are rallying against bank fees, acknowledges Bob Meara, senior analyst in Celent's banking group. But, he says, if banks don't at least consider charging a fee, they could be missing an important opportunity. Meara says he knows of only one other bank beside U.S. Bank — Memphis-based regional bank First Tennessee ($25 billion in assets) — that charges a fee for its mobile RDC solution.

The Rise of Tablet BankingBS&T's April digital issue breaks down what it takes to create a superior tablet banking experience and highlights some of the industry's top iPad apps.

According to Meara, most banks think customers aren't willing to pay fees for mobile services. But customers can more easily see the value of mobile RDC than other services because it saves them a trip to the branch or an ATM, which is most likely worth more than a 50 cent fee. "You can't even start your car for 50 cents," Meara asserts. "You spend more than 50 cents in gas waiting in line at a drive-up teller."

U.S. Bank's Badarinath says the institution will continue to evaluate whether the fee is impacting adoption and usage of mobile RDC and also watch for new offerings from competitors. "Six to 12 months from now, if everybody has it, then it stops becoming a competitive advantage," he explains. "And like with ATM fees, customers will expect to see the fee go down to zero. We clearly see that day coming, but not right now. We made the right decision back then when we decided to charge for it, and so far it still seems to be the right one."

What's Next for Mobile RDC?

Although banks may not be able to charge for mobile RDC forever, more opportunities to differentiate and possibly produce revenue connected with the technology likely will arise. "In many respects, mobile RDC is the first wave of [mobile] payment-related products," says Chris Jackson, mobile banking product manager at Open Solutions, a Glastonbury, Conn.-based financial services vendor that focuses on community banks and credit unions. "The mobile device is becoming a key tool in the payments arena. But checks are still a part of payments, so users are going to expect mobile capture if they're going to be making or receiving P2P payments."

Even as check volumes decline, banks will find more innovative ways to apply the type of image capture capabilities that mobile RDC leverages, says Celent's Meara. Both Meara and U.S. Bank's Badarinath point to solutions such as those offered by San Diego-based mobile imaging software vendor Mitek Systems. "There's a way to take a picture of a check and enroll with mobile banking because the routing number on the check is tied to the phone you took the picture with, for example," says Badarinath. "And there's a way to take a picture of any bill and enroll in both online banking and mobile bill pay."

The Rise of Tablet BankingBS&T's April digital issue breaks down what it takes to create a superior tablet banking experience and highlights some of the industry's top iPad apps.

U.S. Bank has made a significant investment in the image capture capabilities of its mobile RDC solution, Badarinath says, and the bank continues to refine it. That allows for a positive customer experience not only with mobile RDC, but also with any future developments in banking-related mobile image capture, he adds. But until that day comes, Badarinath says, U.S. Bank is focusing on evolving the mobile RDC solution. "We expect to see a complete redo of the way the customer does RDC on the phone," he relates. "It's going to be much more visual and intuitive, and it will take fewer steps."

Although most mobile RDC solutions are designed for smartphones, says Open Solutions' Jackson, there soon will be more activity on tablets. "Tablets are going to be the next significant driver in the next year or two," he says. "We'll see more use of mobile RDC in the tablet world, plus new ideas coming out in the tablet world that are inspired by mobile RDC."