PALM DESERT, Calif. — Community bankers are adopting remote deposit technology much faster than they ever took to the Internet.
In a survey released Monday at the American Bankers Association's National Conference for Community Bankers here, 58% of the respondents said they have adopted or plan to adopt the three-year-old technology by the end of next year. Fifty-eight percent also said that remote deposit capture would be their top technology-spending priority this year.
By comparison, community banks were slow to embrace Internet technology when it was in a similar stage of its life a decade ago. Only 22% of community banks that responded to a similar survey in 1997 said they had developed Web sites.
The survey was the 11th annual one conducted by the ABA Banking Journal and released at the ABA's annual conference of community bankers.
Remote capture lets business customers convert checks into digital images in their offices and transmit the files electronically to a bank for deposit.
In this year's survey, 30% of bankers said that the adoption of remote deposit was "an essential survival strategy," and 24% said that they adopted it "to be on tech's leading edge." Also, 16% said competitors had started offering it, nearly 16% said they started offering it to cut processing costs, and 13% said that customers were asking for it.
James W. Aldrich, the chairman of the $312 million-asset Delaware Place Bank in Chicago, said at the conference Monday that his bank had implemented remote deposit services within the last 90 days.
"We're a one-branch bank, and this provides us with a way to satisfy the needs of our customers without having to build additional branches," he said.
Many bankers said the new offering is paying off; 65% of those using remote deposit said it has helped them attract new business customers, and 60% said that it has helped them retain current customers.
Steve Cocheo, the executive editor of the ABA Banking Journal, said that any bank that gives their business customers the gift of time is ahead of the game.
"This will become a commodity before too long, so banks that offer it first will get the credit first in customers' minds."
Still, some banks are not getting the results they expected.
Thomas Palmer, the president and chief executive officer of the $284 million-asset First National Bank of River Falls in Wisconsin, said that it implemented remote deposit last spring, but that so far business customers are using less than half of the 60 scanners the bank bought.
"I thought it would have been something that customers would jump on right away, because it would save them time," he said. "But a lot of the administrators would prefer to get out of their offices and make deposits at our branches — so that they could also pick up their dry cleaning and do other errands."
Eventually, Mr. Palmer said, he believes remote deposit will catch on in his market as more customers warm to it.
Remote deposit is not the only hot technology for bankers — 53% said that they have implemented imaging technology to help them take advantage of the Check Clearing for the 21st Century Act, which makes it easier for banks to clear checks electronically and reduce float time. Twenty-three percent said they will implement such technology this year, and another 10% plan to do so next year.
Among the survey's other findings:
o Thirty-four percent of the respondents said they had been affected by a third-party's data security breach, and 5% said they had a breach of their own.
o Thirty-four percent let their employees carry laptops containing customer information off the premises; among those respondents, 76% encrypt the information, 31% use physical locking devices, 20% use software that turns the laptop into a "dumb terminal," and 7% have software that shuts down and locates a stolen computer. (Respondents could choose multiple answers.)
Funding seems to be increasingly tough for bankers; 38% said that they have increased Federal Home Loan Bank borrowings over the last year, and 35% said they are using more brokered funds than they did five years ago. However, 47% said they have never used them.
Interestingly, deposits from health savings accounts have not panned out as well as supporters — namely the Bush administration — had predicted, Mr. Cocheo said. While a third of the banks surveyed offered such accounts, 83% of those banks said that they have not been a good source of deposits. Mr. Cocheo said that it may take time for account balances to add up.
Branching is as important as it ever was — 78% of the bankers said it will remain community banks' main source of growth, or roughly the same percentage who said the same thing in last year's survey.
As far as branch convenience, 77% banks had branches that were open Saturdays, but only 5.4%, mainly in the Northeast and the Middle Atlantic, had Sunday hours. Four in 10 banks in the Northeast were open evenings, while hardly any bank in the West had evening hours. Overall, 23% of the respondents had evening hours.
As in previous years, bankers are having a tougher time finding qualified compliance officers, business lenders, information technology officers, and trust officers. But topping the list this year is chief risk officer (a new category), with 94% of the respondents saying that it was hard or very hard to find a qualified one in their market.
Mr. Cocheo said that the ABA added the category because more banks are creating the position to oversee "enterprise risk management." Regulators are increasingly urging banks to identify, measure, and manage a range of risks — including credit, market, operational, and liquidity — and aggregate and correlate them across business lines.
When asked regulators' biggest focus during their last bank exam, 52% of respondents said it was the Bank Secrecy Act, 27% said commercial real estate concentrations, 4% said capital ratios, and 18% said "other." Slightly more than half the bankers said regulators had put some emphasis on enterprise risk management, while nearly a third said that there was a "great deal" of emphasis.
Overall, 23% said that their last exam last year was harder than the one before, 11% said it was easier, and 67% said it was about the same.
Bankers were also asked about their expectations for the coming year. (The survey was conducted last fall.) The bankers were split roughly evenly on whether their funding situation would be harder or stay the same; only 4% said that it would be easier.
Twenty-four percent said that loan growth would be higher, 20% said that it would be lower, and 56% said it would remain the same.
Mr. Cocheo said that a link to the full survey will be available Thursday on the ABA Banking Journal's site,
