Most large and mid-tier banks offer remote deposit capture to their corporate customers, but the industry has been slower to offer these services to small businesses, leaving an opening for nonbanks such as scanner manufacturers and independent sales firms.
"Banks are not giving out the sales and marketing effort," said Bob Meara, a senior analyst at the Boston market research company Celent.
One factor holding back banks is the complex logistics of remote capture, which can discourage banks from aggressively selling the product to small businesses. Financial companies typically install and maintain scanning equipment at customers' sites; sometimes they charge for the equipment, but sometimes they provide it for free.
Between the equipment, maintenance and transaction fees, the industry is still tinkering with revenue models. As a result, many banks supply remote capture services to a limited number of key customers, but do not deploy them as a means to expand the customer base or geographic footprint, two potential benefits most often cited by suppliers.
"The average bank isn't very aggressive about signing up more RDC customers," said David Foss, the president of ProfitStars, a division of Jack Henry & Associates Inc. that peddles remote deposit software. Though banks are the gateway to about 70% of the 27,000 merchants Jack Henry supports with remote capture, Foss said he expects that most customers will come through the ISO channel within three years.
Banks' hesitation to offer the service to small businesses is opening the door for nonbank players, particularly those with a history of selling office hardware to small businesses. Seiko Epson Corp., a seller of printers, terminals and kiosk products, began developing its remote capture strategy about 18 months ago by introducing of a line of check scanners. In quick succession, remote capture software vendors — including Goldleaf Financial Solutions Inc., Metavante Technologies Inc. and Zions Bancorp.'s NetDeposit Inc. unit — certified the scanners.
Epson is targeting up to 100 of the largest ISOs nationally to sell its remote capture products, said Tom Kettell, the strategic business manager for emerging markets at the company's Epson America Inc. unit. "We believe it's the only way we're really going to penetrate the small-business market," he said, "because a lot of financial institutions are not geared up for it."
Postal meter specialist Pitney Bowes Inc. also sees an opportunity in remote capture. It announced in May plans for a partnership with Jack Henry to offer a remote capture service that includes installing and supporting the hardware. Maintaining customer hardware is a core competency of Pitney Bowes and removes the burden from banks.
Rather than circumvent banks, Pitney wants to target banks with mutual small-business customers and sell the products through partnerships. The partnership approach is atypical of the usual ISO practice of selling directly to a merchant, a strategy that requires software vendors to find a sponsor bank. Having banks already on board would be an attractive perk for the software firm. "We'd rather not be in the middle of doing underwriting and finding a sponsor bank," Foss said.
Another participant, the film company Eastman Kodak Co., is tapping its scanning and imaging expertise to enter the remote capture market. In October it began offering a remote capture service to small businesses, in conjunction with CFC Technology Corp. In this model, potential customers choose which bank to work with from a list of participating financial companies. (Kodak and CFC officials would not say how many are on the list.)
"This is a direct marketing effort to the small-business community," said George Santos, Kodak's business development manager for document imaging. "This is an opportunity for us to refer business to the banks."
A large market exists for remote capture. Celent estimates that about one-third of the small-business market is using the technology. But if prices come down, as Celent expects, many more companies will want to use it. "It will be a whole new ball game," said Meara.