Prized Deposits Grow for Boston Bank Using RDC

Opportunity rather than any specific problem prompted Mercantile Bank & Trust Co. ($139 million in assets) to embrace remote deposit capture (RDC). "When we started reading about this, our reaction was, 'Holy cow! It looks like a no-brainer,'" relates Joe Nicotera, the bank's SVP.

Mercantile is a three-branch bank located on the city limits of Boston, and 98 percent of its business is serving small-business customers within a 50-mile radius, according to Nicotera, who notes that loan customers "were coming in the door like crazy." Though the bank did not lack the liquidity to make loans -- even during the credit crisis -- it recognized that it's always good to boost deposits since they are the cheapest source for funding loans, Nicotera says.

But, "There's no way to get customers to drive 30 miles to the Boston area for a deposit," Nicotera continues. And to add even the least-expensive satellite branch near Boston would cost about $300,000 in capital spending plus monthly staffing and utility charges, according to Mercantile's calculations.

By contrast, Nicotera relates, RDC costs "well under $10,000," and the bank is meeting that cost with a $60 monthly charge to its business customers that use RDC. More important, he notes, the ease with which a business customer can remotely deposit checks from his or her own premises, using a check scanner and some software, is a major value-added benefit that encourages businesses to become Mercantile customers.

Since introducing RDC in March 2007, Mercantile has added $4 million in new deposits -- approximately 80 percent from new customers and 20 percent from existing loan customers who previously did not have a deposit account with the bank -- to a starting base of $129 million in deposits, Nicotera reports. So with one move Mercantile achieved three holy grails in the industry: It increased deposits, boosted customer acquisitions and increased its wallet share of existing customers. The monthly RDC user fees, Nicotera notes, amortize Mercantile's main cost -- the $700 to $800 Panini (Dayton, Ohio) check scanners that Mercantile provides to its customers for free.

Mercantile spent nearly six months selecting vendors to enable the RDC initiative. On the software side, the bank chose a vendor that it knew would be compatible with its core processing provider, Avon, Conn.-based COCC. Glastonbury, Conn.-based check imaging vendor Open Solutions (OSI) wrote the source code used by COCC to support remote deposits. "Open Solutions has to pass the credit on to the customer's account [in COCC's core processing system]," Nicotera explains, adding that the integration was "an easy transition." (In fact, COCC has since chosen OSI as its preferred check imaging provider.)

Other than that minor hookup, "There was no integration whatsoever required on our end," Nicotera says, noting that the bank didn't need to employ any extra back-office staff. Training for existing staff took just a day, while for new RDC customers, Nicotera adds, "within a half-hour, they have made their first deposit. It's so simple, it's scary."

RDC also has sped error resolution. While business customers always were responsible for correctly totaling their check deposits, in the past errors might not have come to light until the next day, when a business would realize that its balance was lower than expected. RDC flags discrepancies instantly, Nicotera says, providing benefits for both the bank and its customers -- Mercantile staff don't waste time reconciling errors and customers enjoy more control.

Case Study Snapshot

Institution: Mercantile Bank & Trust Co. (Boston).

Assets: $139 million.

Business Challenge: Increase deposits without adding branches.

Solution: Remote deposit capture enabled by Open Solutions (Glastonbury, Conn.) check imaging software.