The Planets Align for a Boom in Mobile Remote Deposit Capture

Only a handful of the nation’s 13,000 financial institutions today offer remote deposit capture to consumers, but, riding the wave of smart-phone popularity, the number is poised to mushroom, according to new research findings from Celent LLC, Boston.

Some 66% of 187 banks and credit unions Celent surveyed in September said they were planning or considering a mobile remote deposit capture solution, up from 51% last year and only 26% in 2009. Fourteen percent of respondents this year either have a mobile capture service for consumers in place or are testing one. On the other side of the coin, only 20% of Celent’s respondents this year have no plans for a mobile remote capture service, down from 45% in 2010 and 72% in 2009.

The findings come in a report titled “The State of Consumer RDC 2011: Mobile Takes Center Stage.” Celent senior analyst and report author Bob Meara tells Digital Transactions News that based on vendor reports and his own estimates, only 137 financial institutions currently are live with a mobile remote capture service, including tests, and another 133 are in the implementation queue. But, according to Meara, the planets are aligning for a much greater spread of consumer remote capture, especially mobile remote capture, because of technological and regulatory reasons.

Greater use by consumers of Twain-based scanners and printer/scanners in the 2000s helped launch desktop consumer remote capture about five years ago. USAA Federal Savings Bank made a splash in 2006 with the introduction its Deposit@Home service for its widely dispersed customer base. Today Celent estimates that 291 banks and credit unions either offer desktop remote capture to consumers or are piloting it, with another 154 in the process of implementation.

After two years, according to Meara, USAA determined that it had obtained most of the growth it was going to get out of customers who had the necessary home scanners, and concluded that mobile devices represented the best path to future growth. “The Twain approach works really well for small businesses because such a high percentage of them have the requisite hardware,” he says. “Too many of them [consumers] don’t have the requisite devices.” More and more consumers, however, do have smart phones with the right technology, that being cameras and software capable of transmitting images.

With remote capture from homes or small businesses, the depositor scans the front and back of a check using a Twain scanner and uploads the images through an online-banking program. In the mobile version, the consumer uses a smart phone to scan each side of the check and then uploads the images through his bank or credit union’s mobile site.

Contributing to the growing consideration of consumer remote capture among bankers, according to Celent, is a change in their mindset that said that, for risk-control purposes, an imaging solution must be capable of reading the check’s magnetic ink character recognition (MICR) line. Now, even though Twain-based scanners don’t read the MICR line, bankers have concluded that they can keep fraud under control without it.

Also contributing to remote capture’s growth prospects is the completion of the first rounds of bank audits that included guidance from the Federal Financial Institutions Examination Council about remote deposit capture risk. The FFIEC, a consortium of regulatory agencies, published the guidelines in 2009. The feds apparently dinged few banks for major failures in remote deposit fraud control. “The vast majority of banks have been through their audits and they lived to tell about it,” says Meara.

In fact, the guidelines offer virtually no “dos” or “don’ts” about the mobile variety of remote capture. “Mobile in particular doesn’t seem to be even contemplated in the guidance,” Meara says. What that means is that banks and credit unions can likely implement a service that will pass regulatory muster if they follow the guidelines in determining what kind of customer is an acceptable risk for the service, according to Meara.

While big institutions such as USAA and JPMorgan Chase & Co. have garnered plenty of headlines for their remote capture services, it is community banks and credit unions that dominate the niche. Some 213 of the 291 institutions offering desktop remote capture, for example, have assets of less than $1 billion. Of the 137 institutions offering mobile capture, 93 have assets under $1 billion while only eight have assets exceeding $50 billion.

Those numbers don’t surprise Meara, who notes that the approval and implementation processes take less time at small institutions than big ones. “It’s easier to steer a small ship,” he says.

Credit unions especially see remote capture as a way to compensate for their lack of branches. “Credit unions are consumer-focused, they are under-branched,” says Meara. “They lose business when people move. It’s just a no-brainer.”

With the notable exceptions of USAA and Chase, however, few big banks regard remote capture as a no-brainer. Some do offer the service but give it little marketing support, according to Meara. The reason: they don’t want to divert business from the branch networks that they have spent so much to develop. “[Remote capture] is an idea that has legs, but is one that is terrifying if you’re big,” he says.