The innovative technology of depositing checks by cell phone has attracted some enthusiastic customers. An issue for banks, however, is that the customer segment utilizing so-called “mobile remote deposit capture (RDC)” remains small and fraud concerns continue to hinder rapid expansion of the service.
RDC in general is definitely a growing source of transactions for banks. A November 2011 study conducted by Boston-based Celent found that more than 130 U.S. financial institutions offered mobile RDC to consumers. And a Celent survey last September found that 66% planned to offer remote mobile RDC, up from 26% in 2009.
The main reason banks have been adding mobile RDC to their service options is to provide customers with more utility and convenience in the mobile channel. Longer term, they also expect to lower their own costs by reducing check deposit transactions in the branch.
“Over time, this could be a key factor in our ability to reduce branch traffic,” says Dan Marks, chief marketing officer at Memphis-based First Tennessee Bank, which began offering the service in September 2011. “But we will need to reach some level of scale before that will happen.”
Keeping it Small
Rockland Trust in Rockland, Mass. began offering mobile RDC in January 2011 on iPhones and has attracted 4,500 customers out of 13,000 who utilize mobile banking. While some banks have pitched mobile RDC to the small business segment, Alex Jimenez, a senior vice president at Rockland Trust, says the service is only efficient for very small independent companies. “If you are going to deposit 100 checks or more, it is not convenient and a business would be better off with a traditional RDC service. But for attorneys or CPAs that only need it to deposit a few checks a month, it works well.”
Minneapolis-based U.S. Bancorp, which rolled out the service in early 2011 on iPhone and Android phones, found that usage exceeded expectations. “We expected that it would be small checks under $100, but we were surprised at the breadth of types of checks, the frequency of use and size of checks being deposited,” says Niti Bodarinath, senior vice president. While U.S. Bank is aiming the mobile RDC offering only at consumers and offering small businesses other RDC services, Bodarinath says a few very small businesses are using the consumer product as well.
Fraud was initially a concern for all three banks. There is the potential that a customer could use the mobile service to electronically deposit a check at one bank and then physically deposit the same check at a second bank. While the automated clearing house (ACH) should catch the matchup in bank identification numbers, it could take several days for that to happen and most banks want to offer same-day or next-day funds ability.
As a result of these concerns, most banks initially are limiting the size of checks and offering the service only to long-time customers who have proven to be trustworthy. “We were really nervous about fraud because we were the first in our footprint to offer this. But so far, there has been no fraud, so we have started to allow new customers to use the service but with lower check limits,” says Rockland’s Jimerez.
U.S. Bank limits the size of the check to $5,000. Initially it required that customers be with the bank for 12 months, but has been slowly loosening the restrictions. First Tennessee limits check size to $3,000 (up from $1,000 when first offered) over 30 days and restricts eligibility. So far, fraud has been “very low,” according to Marks and the bank has slowly begun to raise limits on checks and broaden availability.
Another concern of the bankers is that phone cameras could not take images of sufficient quality. U.S. Bank, for example, expected early acceptance rates on mobile check images of below 80%. But improved software on the bank’s server, which corrects for wrinkles or shadows, has led to nearly 100% acceptance, Bodarinath says.
Additionally, Marks notes that the latest models of phones have better image capabilities and that, as more consumers get those phones, the quality of those images will improve.
Ms. Giesen is a contributing writer to BAI Banking Strategies based in Libertyville, Ill.