The remote capture of digital check images is moving beyond the big banks that first offered it to smaller institutions.
Bankers and market watchers say that to some extent the move is defensive, that community and regional banks are trying to keep the industry's giants from taking away their customers. Vendors, seeing an opportunity, are expanding their offerings to this market.
But observers say remote capture also presents new opportunities even to the smallest banks, including a chance to vie with much larger ones for deposits.
United Bankers' Bank in Bloomington, Minn., has developed a merchant-capture service that its 260 shareholder banks can sell to their business customers in the upper Midwest. That service is part of a package that also features branch capture and image-based clearing and settlement.
William C. Rosacker, the president of United Bankers' Bank, the operating unit of United Bankers' Bancorp Inc., said 12 to 15 banks are sending image files to it now, but demand is growing.
"The bankers are more interested in merchant capture than they are in branch," Mr. Rosacker said. "If the community banker does not do that, he has lost his Main Street merchants to the megas."
United, the nation's oldest bankers' bank, is working with LendingTools.com Inc., which offers services to community banks and primarily markets itself through bankers' banks. LendingTools.com announced last month that it was rolling out a remote-deposit service using Vector SGI image technology from Metavante Corp., a toolkit that is better known for use by big banks.
Eric Goering, LendingTools. com's president, said the Wichita company provides hosting, but the approach allows bankers to maintain their existing relationships. "No one is disintermediated in this process," he said. "There are a lot of banks waiting for this solution."
Other vendors pursuing the small-bank market include the online banking outsourcer Digital Insight Corp. of Calabasas, Calif., which announced last month that it would offer a remote-deposit service to the 1,750 small and midsize banks that use its service. Digital Insight is working with the payment processor BServ Inc. of San Francisco, which does business as BankServ.
Bryan Laws, Digital Insight's director of business solutions, said the company hoped to have its first banks in the pilot stage in 90 days or less.
"We view ourselves as an enabler, giving our customers the tools they need to compete and win," he said. "We have turned a fairly exclusive product into a widely available and market-leading capability."
The financial technology provider Fiserv Inc. of Brookfield, Wis., announced enhancements last week to the remote-deposit system offered through several of its business units.
Robert Hunt, a senior analyst at the market research outfit TowerGroup, a MasterCard International unit, said the strong business demand for image-based deposits surprised many in and around the banking industry when the Check Clearing for the 21st Century Act took effect in the fall of 2004.
"The early introducers were the big cash management banks, and they were targeting the larger corporate customers," Mr. Hunt said. "It was very targeted in the early inception. We all thought about float gains. But this is a convenience product for small businesses."
One early adopter was the $46 million-asset Independence Bank in East Greenwich, R.I., which in August of last year came out with a service called Cool Deposit. John Charette, the bank's vice president of business technology, said, "Our customers named it that."
Independence has 35 businesses in four states sending check images to it, Mr. Charette said Monday. He said that by the end of this month it expects to have 50 customers in eight states, all making deposits to its single branch.
Independence, a Small Business Administration lender that received a bank charter in March 2003, seized the opportunity to gain deposit business from its borrowers, Mr. Charette said.
"We view it as a way to gain new customers and expand our footprint," he said. "We're going to do that without laying any more bricks."
Vijay Balakrishnan, the vice president of strategic marketing at Metavante's image solutions unit, said it was ironic that small banks are playing catch-up. "Big banks saw the opportunity very early," Mr. Balakrishnan said, "even though a lot of the smaller banks were already image-enabled."
Metavante, the technology subsidiary of the Milwaukee banking company Marshall & Ilsley Corp., is seeing interest in remote capture from banks of all sizes, Mr. Balakrishnan said. "Small banks are now beginning to step up to the plate," he said.
John Leekley, a partner in the Parsippany, N.J., consulting firm Blue Mountain Enterprises LLC, said small banks can use remote capture to contend against much larger rivals.
"You're going to see tremendous uptake," said Mr. Leekley, who tracks the imaging business for RemoteDepositCapture.com. "These banks are leveraging their small size and their nimbleness to get this to market very quickly."
Factors such as the ability to attract deposits and improve customer convenience will probably outweigh issues that big banks have focused on, such as transportation cost savings, Mr. Leekley said. "These banks can't achieve the economies of scale, but they don't need to," he said.
