Banks’ Remote Capture Fee Focus Is Misplaced, Experts Say

Many financial institutions that have jumped into remote deposit capture to reap fee income, or have shied away from it out of fear of risk, may be missing the point, according to experts who spoke this week at a conference on the subject. Instead, banks and credit unions should focus on revenue from deposit growth and use remote-deposit technology to keep a lid on risk, the speakers said. “It’s not remote fee capture, it’s remote deposit capture,” John Leekley, chief executive of Alpharetta, Ga.-based RemoteDepositCapture.com, told the audience at his company’s RDC Summit in Orlando, Fla.

With about two-thirds of all U.S. financial institutions now offering the service, remote capture has quickly established itself as what many experts say is the fastest-growing electronic-payment service in history. But many banks view the service as a way to beef up fee income and have become embroiled in a downward competitive spiral that has seen average remote-capture fees plummet. Other speakers at the conference estimated the average monthly fee to merchants and other businesses has been halved in the past year from $50 per month to $25, often with check scanners included.

Banks’s focus on fee revenue, Leekley tells Digital Transactions News, creates an opening for independent sales organizations and other non-bank resellers hoping to establish a beachhead in remote capture, a service that allows merchants to truncate checks at the store or office for processing under Check 21 rules. With a focus on fees, ISOs could underprice banks and offer deposit services with a range of financial institutions, he points out. “It’s amazing to me,” he says. “[Banks] are missing the big picture.”

That “picture” includes what should be an emphasis on the revenue banks could earn from the new deposits they take in from new customers and bigger deposits from existing ones, he argues. He presented an illustration in which the revenue from lending activity on deposits, combined with a bank’s internal rate of return on those deposits, accounted for more than 90% of total revenue from offering remote capture. “The money lies not in the fees you charge,” Leekley told the audience, made up chiefly of financial-institution representatives. “It’s all about the deposits.”

Toby Asplin, strategic partnership officer at First National Bank of Omaha, added that banks must combine marketing with remote capture to maximize deposit income. “You’ve got to be able to attract new customers or get deposits from [existing] customers you don’t already have,” he told the audience during the session with Leekley.

Financial institutions that have avoided remote capture or have been too cautious about it for fear of fraud risk should re-think that reluctance, Asplin said. He argued that the service includes technology, including duplicate-detection software and deposit limits, that may not be available otherwise and helps control risk. “My premise is that the technology actually improves your ability to mitigate risk,” he told the audience. With remote capture, businesses must destroy original checks after imaging them to avoid the risk of duplicate deposits.