While applications that let consumers deposit checks via mobile phone are all the rage, some banks are finally getting around to upgrading remote deposit technology for its original audience: businesses.
Realizing there is still significant room to expand their small-business clientele for standard remote capture services, these banks are offering to automate the recording of scanned checks. They are also looking to jump-start overall marketing of commercial remote deposit capture, after having put product development and sales on hold the past few years to create risk controls mandated by the Federal Financial Institutions Examination Council in 2009.
"Financial institutions kind of took their foot off the gas in selling RDC until they had a better handle on the FFIEC guidance and understood what their examiners and their auditors were looking for," said Matt Bowen, the senior vice president of check and document image solutions at Fidelity National Information Services Inc., a Jacksonville, Fla., vendor.
"Now that they had that, they're more aggressively selling the service," Bowen said. "Many of the bigger banks are moving down-market to work with small- and medium-sized businesses because it's a newer market for them and the technology is available, and it's more useful to support those markets."
The early pitch for most banks in offering basic capture services was the ability to "convert your check to something else," said David Foss, the president of ProfitStars, a unit of the technology vendor Jack Henry & Associates Inc. in Monett, Mo. "It was a revolution at the time but it was a pretty simple story."
"Now there's a version-two story" banks can tell about making the service more useful to commercial clients, Foss said.
The renewed emphasis on remote capture is part of an overall push by banks to offer more customized services to small businesses, which have been stuck using retrofit versions of software intended for larger commercial customers or consumers.
"For many banks, small businesses have been kind of a redheaded stepchild," said Bob Meara, a senior analyst at the research firm Celent. "The solutions they brought to bear weren't really a good fit. They either dumbed down a corporate solution or they tried to smarten up a consumer solution and the vendors didn't help initially either. Now the market's generally kind of trying to fill those gaps and better serve small businesses."
Capital One Financial Corp. announced April 11 that it was improving its remote deposit capture service to make it easier for small businesses to match payments they receive with accounts receivable.
Using the Apply Payments feature in Capital One's capture service, customers can have their deposited checks referenced against receivables in Intuit Inc.'s QuickBooks or Sage Group PLC's Peachtree accounting software, both made for small businesses.
"It's a way for … our small-business customers to auto-apply payments in their business just like the big guys do," said Christopher Ward, a senior vice president and head of product management and innovation at Capital One.
Previously, smaller businesses using remote capture would have had to manually enter information about checks they received into QuickBooks or Peachtree. The new feature was provided by the remote capture software vendor RDM Corp.
Most major remote capture vendors, including Fiserv Inc., FIS, Wausau Financial Systems Inc. and BankServ, have added the ability for customers to link deposits with QuickBooks, Peachtree, Quicken and other small-business accounting programs in recent years.
Additionally, some vendors have added data extraction features to make it easier for users of industry-specific receivables management programs to track payments. For example, Wausau has focused on making it easier to extract and update remote deposits in software used by day care operators, property managers and other businesses, said Sam Golbach, vice president of solution management at the Mosinee, Wis., vendor.
But analysts said not all banks have decided to offer these features to small businesses and the ones that do offer it have not always been good at promoting them. "That market is today pretty untouched but it's a potentially huge opportunity for banks," said Leigh Sherman, a senior retail consultant at Cornerstone Advisors Inc. in Scottsdale, Ariz.
While Capital One's integration is not a revolutionary feature, it shows the new importance banks are placing on the small-business market, Sherman said. "At the end of the day this is a Capital One nationwide small-business banking play," he said. "That is a very important market for them and [with] this they don't have to build brick-and-mortar" branches.
Depending on asset size, financial institutions estimated they had only reached 15% to 19% client adoption of remote deposit capture services, according to survey data in a November report from Celent. Of 189 financial institutions, 44% said client growth was their top priority for the service in the coming year. Sixteen percent named new products and 13% said product upgrades.
"There's only a handful of [banks] that have done much in penetrating the small-business marketplace," said Danne Buchanan, vice president of payments solutions at BankServ. "They've pretty well blanketed the corporate treasury groups and the large companies but a lot of them are still trying to find their way into the small-business marketplace."
Part of the problem is trying to figure out how to sell to that market, which is large and varied in terms of technology needs and capabilities, Buchanan said.
To make sure banks were not taking unnecessary risks by providing the service, the FFIEC's 2009 guidelines instructed them to regularly assess remote deposit capture customers.
"RDC caught fire and grew so quickly that the regulators were concerned that banks didn't have the appropriate infrastructure in place," Bowen said. "This was one way of reaffirming that they do."
Many of FIS' clients have checklists to determine whether a customer is a suitable candidate for remote capture services, Bowen said. Having that in place has made it easier for banks to target their marketing at prime candidates versus taking a "shotgun approach," as many had done previously by mentioning RDC to every client.
Fiserv, a Brookfield, Wis., vendor, said this month that more than 3,300 financial institutions were using its remote deposit capture services, representing more than 160,000 end users. Gary Brand, the company's director of source capture optimization, said many banks and credit unions have opted to use more than one of its remote capture programs, finding that the initial compliance work they had done for one was applicable to the other.
