Virtually all large and mid-tier banks offer remote deposit capture to corporate customers, but the industry has been slow to offer these services to the small business segment, leaving an opening for competitors such as scanner manufacturers and independent sales firms.

"Banks are not giving out the sales and marketing effort," says Bob Meara, senior analyst at Celent.

One factor holding back banks is the complex logistics of RDC, which can discourage banks from aggressively selling the product to small businesses. Institutions are required to install and maintain scanning equipment onsite, and decide whether they should charge for the equipment or provide it for free. Between the equipment, maintenance and transaction fees, the industry is still struggling to settle upon a widely accepted revenue model. As such, many banks only provide RDC to a limited number of key customers to avoid losing those customers, rather than deploying the service as a means to expand customer base or geographic footprint, two of the potential benefits most often cited by suppliers when the technology was first developed.

"The average bank isn't very aggressive about signing up more RDC customers," says David Foss, president of ProfitStars, a division of Jack Henry that provides RDC software. While banks are the gateway to about 70 percent of the 27,000 merchants Jack Henry currently supports with RDC, Foss says that within three years the majority of customers will come through the ISO channel.

The hesitation is opening the door for non-bank players, particularly those with a long history of selling office hardware to small businesses. Epson, a provider of printers, terminals and kiosk products, began developing its RDC strategy about 18 months ago with the introduction of a line of check scanners. In quick succession, it got a number of RDC software providers, including Goldleaf, Metavante, NetDeposit and Wausau Financial, to certify the scanner.

Epson is targeting up to 100 of the largest ISOs nationally to sell its RDC solution, says Tom Kettell, strategic business manager, emerging markets, at Epson America Inc. "We believe it's the only way we're really going to penetrate the small business market because a lot of financial institutions are not geared up for it."

Postal meter specialist Pitney Bowes also sees an opportunity in RDC. It announced in May it would partner with Jack Henry to provide an RDC solution that includes installing and supporting the hardware. Providing maintenance for customer hardware is a core competency of Pitney Bowes, and removes the burden of the task form banks.

Rather than circumvent banks, Pitney will target banks with mutual small business customers and sell the product via partnerships. This partnership approach is atypical to the usual ISO tactic of selling directly to a merchant, a strategy that requires software providers like Jack Henry to find a sponsor bank. Having banks already on board would be attractive perk for the software firm. "We'd rather not be in the middle of doing underwriting and finding a sponsor bank," Foss says.

Another participant, the film company Kodak, is tapping its scanning and imaging expertise to also enter the RDC market. Last October it initiated a formal effort to reach out to small business customers through a turnkey RDC service offered in conjunction with CFC Technology Corp. In this model, potential customers choose which bank to work with from a list of participating institutions (Kodak and CFC officials did not say how many banks are on the list.) "This is a direct marketing effort to the small business community," says George Santos, business development manager, document imaging at Kodak. He added, "This is an opportunity for us to refer business to the banks."

An additional approach could come from the banks themselves. Chicago-based American Chartered Bank, a $3 billion asset institution with about 550 small business RDC customers, is looking into offering an RDC service that would work with the scanners that small companies and consumers already own. "If you could use existing hardware, you could provide a very low-cost solution," says Bill McGuckin, second vp, treasury management, adding could eventually lead to offering the product for free.

Regardless of the strategy, there would appear to be a large marketplace for RDC - Celent estimates that only about one-third of the small business market is currently using the technology. But those looks can be deceiving, since prices will eventually go down as more players enter the market. "It will be a whole new ballgame," says Celent's Meara, who suggests ISOs may be squeezed as intermediaries when prices fall.

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