ISOs, Economic Crunch Could Spur Banks to Push Remote Capture

While remote deposit capture continues to be one of the fastest-growing electronic payments products ever introduced, banks are still far too conservative in the way they sell the service, says Bob Meara, a senior analyst at Boston-based researcher Celent LLC. That could change soon, though, as resellers such as independent sales organizations enter the market and spur banks to sell remote capture more aggressively, says Meara. Another factor that could make banks push the product harder is an acute need among many financial institutions for liquidity amid the current tumult in financial markets, Meara says. As an efficient deposit-gathering technology, remote capture could present itself to banks as a way to bring in cash fast in the current economy. “Banks are learning it's a faster way [to gather deposits] than building branches,” Meara tells Digital Transactions News. Already, he says, “community banks that are branch-starved have done great things [with remote capture]. They've really moved the needle.” From a standing start in 2004, some 7,239 financial institutions have now introduced a remote deposit capture product, according to Meara's research, which was released last week by Celent. That's up 87% over the total a year ago. Businesses have adopted the product to the tune of 387,522 workstations, up 75% over 2007. With remote capture, a merchant or other business can use specialized software on their own PCs to deposit checks electronically by sending images to their banks rather than hauling in the paper originals. From that point, the images can then be settled through image-exchange networks. But financial institutions are still too defensive in offering the service, Meara says, preferring to extend it only to existing clients and then only when pressed to do so by local competition and the fear of losing depository relationships. “Thus far, not too many banks have been hurt competitively,” Meara says. “As the market gets more competitive, banks will say, 'Holy Smokes, we better get more aggressive.'” This reaction will be most pronounced in the small-business market, Meara says. Here, he says, banks may soon face competition from ISOs that have started peddling remote capture as a way of diversifying their businesses, which are heavily concentrated in credit and debit card acceptance. The effect on banks will likely be varied, he says, with some showing a willingness to work with ISOs “as long as the bank gets the deposit.” Others, recalling how ISOs carved out market share in merchant acquiring, are likely to come out of their defensive crouch on remote capture and compete head-on with ISOs. “Other banks will be spurred on to action,” says Meara. With more banks moving to the offensive, Meara forecasts that adoption by businesses will leap more than 80% next year, to 710,500 workstations, and exceed 3.25 million by 2012. Still, banks' conservative approach in marketing remote capture so far has forced Meara to adjust a forecast he originally made in May 2007. Then, he projected the workstation count would total 785,000 this year and reach 5 million by 2012.