Jack Henry & Associates Inc. is looking to independent sales organizations as a marketing channel for the check imaging service it has started rolling out for the smallest businesses.
The Monett, Mo., vendor said this month that it has started offering its "Dep@sit" remote deposit capture service to the "microbusiness" market segment — companies that may have only three to five checks a day to deposit.
David Foss, the general manager of Jack Henry's ProfitStars unit, said ISOs, which primarily offer card processing to small merchants, also represent a "huge" opportunity for vendors in the check imaging market.
"It's not a big part of our current market, but the ISO market is a big opportunity," Mr. Foss said in an interview last week.
The vendor says its new service requires no software installation on the users' computers and only flatbed scanners, which are becoming increasingly common in homes and small offices as part of multifunction printers.
Jack Henry is aiming at people who may not have formal business banking services or a dedicated check scanner, such as Mary Kay or Avon sales representatives or independent lawn maintenance people, Mr. Foss said.
"There are millions of microbusinesses out there," he said. "They don't qualify as a commercial business, but they are in fact commercial businesses."
Jack Henry said it plans to offer the service to its core banking and credit union customers through its units which serve them, and to others through ProfitStars. The company said the service includes a self-enrollment feature that lets businesses work with an ISO instead of a bank.
In addition, banks and credit unions can integrate the service into their online banking offerings for single sign-on access.
John Leekley, the founder and chief executive of the Atlanta consulting firm RemoteDepositCapture LLC, said pricing and fraud prevention could be concerns. "Most small businesses can deposit checks without a fee," so the service may not be attractive to customers of an ISO, which ordinarily would expect a slice of the transaction fee revenue.
An ISO could offer the service as an add-on, "maybe even a loss leader, because it really has the potential to lock in those customers," Mr. Leekley said.
The self-enrollment feature also raises the risk that the payment portal could be used for check fraud, he warned.
Brit McPherson, the marketing manager for ProfitStars, said the new service, which Jack Henry hosts, includes analytical tools that let the customer institution set limits on the number of checks, or the dollar amount, an individual user can deposit.
"It's very flexible," he said.
Mr. Foss said that 900 of Jack Henry's customer institutions now offer remote capture, allowing 17,000 merchants to turn their checks into images.
The vendor is processing 11 million remote deposit transactions a month, and each month it is adding a million transactions and 800 to 1,000 merchants. Mr. Foss projected it would be processing 20 million transactions a month by mid-2009.
Jack Henry expects microbusiness remote capture to be primarily a customer attraction and retention tool for the institutions that offer it, Mr. Foss said. "It won't add a lot of transaction volume, but the big deal for us is that it gives our bankers the opportunity to go after those microbusinesses."
Two banks are live on the service now, he said, but he could not name them, because they plan to use the service as a competitive advantage.
A third bank, the $4 billion-asset Riverside National Bank of Florida in Fort Pierce, is scheduled to go live with the service next month, Mr. Foss said.
John Edgar, the vice president of cash management services at Riverside Bank, a unit of Riverside Banking Co. in Fort Pierce, said in Jack Henry's announcement, "Microbusiness capture can extend our bank's geographical coverage beyond our branch network, attract new deposits, and provide another competitive differentiator in the markets we serve."
Mr. Foss said banks are cautious about offering image capture for consumer checks, because of the fraud risk. "But they will offer it to microbusinesses, because that's a market they are trying to address anyway," he said. "In the credit union space, we expect it to be a big hit with consumers," because credit unions often have a very narrow geographic scope, and this would be a way to provide convenience for their members. "That's what credit unions are all about."
Mr. Leekley of RemoteDepositCapture said he expects institutions to strengthen their efforts in check imaging next year, as a result of the credit crisis and the industry's thirst for deposit growth.
"A lot of banks have not been as aggressive as they should be," he said, even though affluent consumers and entrepreneurs have shown themselves quite willing to adopt technology that offers convenience or productivity improvements.
Some bankers want to charge fees for these services to businesses, Mr. Leekley said, but they are missing the point about a larger benefit.
"There are banks out there that are connecting the dots and recognizing the value of RDC. The fees can be miniscule compared to the value of the deposits retained or grown thanks to RDC," he said. "They make loans off those deposits. Without the deposits, the loans would never be possible."
Dana Gould, an analyst at the Financial Insights unit of International Data Group Inc. of Boston, said Jack Henry and its competitors have flocked to consumer and small-business check capture since USAA Federal Savings Bank of San Antonio introduced its service in December 2006, targeting its far-flung customer base of mostly military families.
"A lot of people have been talking about it for some time now, but it's awfully hard to get a handle on how popular it is or how successful," since the numbers in the consumer image capture niche may be too small to brag about at this relatively early stage of adoption, Mr. Gould said. "They would report it if they had large numbers of people jumping in."
