Today, if a bank isn’t offering remote deposit capture (RDC) by a mobile device, it’s likely on their roadmap. In a November 2011 survey of financial industry vendors and service providers, Boston-based Celent LLP found that 80% of financial institutions are planning or considering a mobile RDC solution. Why? Because customers have proven that they will switch banks to get it. Additionally, mobile RDC has been proven to be a catalyst for generating new revenue sources, new customers and deposit growth.
With more than 50 million Americans expected to do mobile banking by 2015, according to Forrester Research, it’s no wonder that mobile RDC is becoming “table stakes” for banks of every size. But rolling out mobile RDC requires considering a number of factors, including how the technology integrates with an organization’s existing mobile banking offerings; risk management issues; and best practices for marketing the technology and turning it into a revenue-generating tool.
Mobile RDC can be rolled out either as a standalone application or it can be tightly integrated into existing mobile banking applications. The latter approach is advantageous for improved workflow, risk management and fraud mitigation because the mobile RDC software is fully integrated with the bank’s existing systems behind its firewall, offering additional levels of security. The mobile component should fit seamlessly into this existing infrastructure; in fact, the back-office system should not have to know or care how the transactions originated.
Connecting to the existing online banking infrastructure and integrating the online and mobile banking systems reduces the need for human service and intervention, as well as post-transaction processing, which saves the bank significant time and money. For example, Bank of America Corp. recently estimated that the cost to process a deposit at a branch is 13.6 times higher than via a mobile device.
Another important consideration is that the mobile application and the servers it connects to must be able to scale to support large numbers of customers using the system concurrently during peak times, as well as interface with the bank’s existing credentialing, deposit systems, business rules, and process flow.
The risk scenarios associated with mobile RDC are essentially the same risks as deposits made through a branch or an ATM. However, because the mobile depositor is still in possession of the original paper check after depositing through the mobile app, there is some potential for loss in a scenario known as “duplicate item presentment.” This occurs when a bank customer deposits the check via the mobile app and then makes a duplicate deposit at the branch location.
The FFIEC Guidance on Remote Deposit Capture recommends that financial institutions implement controls and policies to mitigate potential losses. One of the most effective ways to prevent fraud and abuse is to pre-qualify customers for the mobile RDC service. Some common metrics banks can use for eligibility include length of time as a customer, average balance in accounts and incidents of overdraft activity. Another best practice is for financial institutions to impose deposit limits that restrict the number and dollar amount of checks deposited through the mobile RDC service over a defined period of time (daily, weekly and/or monthly).
However, while it’s important to protect the bank against losses with service limits and restrictions, an overly conservative approach will undermine the commercial success of the offering. Financial institutions with successful mobile RDC solutions strike the right balance in their risk management programs.
Financial institutions can also maximize the success of their mobile RDC solution through effective marketing campaigns, which do not necessarily require costly expenditures. Prior to launching a mobile RDC solution, banks should pre-qualify existing mobile and online banking customers who can then be directly targeted with marketing through the mobile banking app and when online banking.
Banks can market online banking customers through the Website by using a public site banner ad to grab attention and direct users toward the new features. Additionally, by integrating social media plug-ins to sites such as Facebook, Twitter and LinkedIn users can be encouraged to “share” or “like” the product or experience with others in their network. This generates interest without costly advertising. YouTube videos integrated into mobile and online banking are also effective tools to market, educate and build interest in mobile RDC.
Deploying a successful mobile deposit solution requires planning, expertise and the right technology. But with a strategy in place, banks that overcome the challenges will be rewarded with increased customer satisfaction and reduced attrition, as well as an effective means to attract new customers and keep them over the long term.
Mr. DeBello is President and CEO of San Diego-based Mitek Inc. He can be reached at firstname.lastname@example.org.
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