When it comes to payment technology, community bankers' top priorities are cutting costs and creating efficiencies for themselves and their business clients, a survey found.
Investing in check conversion technology has been a major priority over the past year, because converting checks to images to speed deposits has had an immediate effect on bank bottom lines, according to the survey, which the Independent Community Bankers of America published last week.
By contrast, community bankers said they consider contactless cards and mobile banking lower priorities, because the business case for them has been less compelling.
Forty-six percent of the 1,100 community bankers surveyed said they are converting checks to images, and about 81% said they plan to reduce their paper check volume over the next two years. Twenty-one percent offer remote deposit to business customers, and that figure is expected to more than double within two years, according to the survey.
The number of community banks that have taken up check conversion is "amazing," said Cary Whaley, the ICBA's associate director for payments and technology policy. "By 2009 almost 90% of them will be processing images."
The $137 million-asset Security Bancorp of Tennessee Inc. in Halls has been using check imaging technology at its branches over the last three months. The company said the technology took about 18 months to implement.
"We receive an inbound Fed image cash letter every morning, and we outbound our cash letter every afternoon by image," said David Hayes, Security's president and chief executive.
The setup reduces Security's costs for armored vehicles and check sorter maintenance, Mr. Hayes said, and at some point he hopes imaging will extend the cutoff time for clearing checks from 2 p.m. to the close of business.
Security is considering offering a corporate credit card, but it needed to establish the imaging system first, Mr. Hayes said.
"Check 21 was a massive operational change, and we have limited staff."
According to the ICBA survey, 61% of respondents issue business cards.
John Buhrmaster, the president of the $277 million-asset First National Bank of Scotia in New York, said it has been using imaging technology and recently it began issuing corporate credit cards.
But the bank has not begun issuing contactless cards that use radio frequency identification technology, because they are not widely accepted by merchants in its predominantly rural market, he said.
Sam Vallandingham, the chief information officer at the $162 million-asset First State Bank in Barboursville, W.Va., said it has been implementing imaging technology and remote deposit to serve commercial customers in its mostly rural market.
But bankers say mobile banking and contactless cards are a lower priority, mainly because merchants are not demanding them.
The ICBA survey shows that less than 1% of community banks issue contactless cards and that only 2% issue contactless debit cards.
"With remote deposit, you can show them a direct cost benefit of accepting those products," Mr. Vallandingham said. "But some of these other emerging products, they're nice and convenient, but it's a little harder to make the case that they need to invest in the upgraded equipment to accept those types of payments."
