Remote capture services have become an important offering for business customers, and banks are now adapting the technology for mobile phones in an effort to reach the mainstream.
Though some bankers say that letting just about anyone deposit checks from just about anywhere could lead to increased fraud, analysts say the potential risks are minimal.
A handful of financial companies are offering or testing mobile remote capture systems now, and observers say the idea is quickly catching on with payments executives, who see it as a cost-effective way to impress their customers and potentially change the cost structure of branch banking.
"I'd be lying if I didn't say this technology is going to be table stakes and we'd love to be on the forefront," said Marc Sanders, the director of marketing at Royal Bank America.
The Narbeth, Pa., company is planning to roll out this quarter a mobile remote capture service that Sanders said would help solidify its relationships with small businesses in the area. Royal Bank began focusing on small businesses in earnest at the end of 2008, introducing a program called "Spur the Economy" and several services aimed at that market.
It launched a remote deposit service about a year ago that used desktop scanners, but Sanders said the devices had no appeal to some people. "There's a subset that doesn't sit at a desk at all," he said.
The 15-branch, $1.3 billion-asset company expects to offer the service to consumers eventually, but the immediate focus is attracting small-business users now — before any larger banks in the area roll out the service and win them over.
"Other institutions with larger IT departments are going to come out with solutions like these," Sanders said. "We need to protect our market, and if we can bring in new folks, that's great."
The Next Step
With mobile remote capture, people deposit checks by snapping pictures of the front and back of endorsed checks using the standard cameras found in most of today's mobile phones. The software converts the photos into digital images that meet Check 21 standards and transmits them to a bank for deposit.
Mobile remote capture represents the latest in a series of remote deposit capture progressions. The technology first emerged as a way for large corporate customers to send in check deposits electronically.
As scanners became more widely available, and their prices fell, the target market quickly spread to include small businesses with lower check volumes, and eventually consumers with in-home scanners.
Delivering remote capture services through camera-equipped mobile phones expands the possible market for electronic check deposits even further.
Smart phones are much more common in households than scanners, and their growth is on an upswing. Smart phone vendors shipped 43.3 million of the devices globally in the third quarter of 2009, according to the research firm IDC, an increase of 4.2% from a year earlier, despite the recession.
Consumer Demand
Randolph-Brooks Federal Credit Union is already developing a mobile remote capture service aimed directly at consumers.
Headquartered in Live Oaks, Texas, Randolph-Brooks has about 300,000 members, whom it serves through 32 branches throughout the state. Though its branch network is fairly extensive, the institution's members have been pushing for ways to deposit checks remotely, said Mary O'Rourke, the assistant vice president of operations.
Randolph-Brooks responded in January 2009 with a scanner-based check deposit product that has attracted more than 12,000 members, who have deposited more than 55,000 checks worth more than $30 million, O'Rourke said. The success of that product has led Randolph-Brooks to develop mobile capture, with expected availability in the first quarter of this year.
In addition to an application for Apple Inc.'s iPhone, Randolph-Brooks is developing mobile capture for use on any phone with a basic camera and Internet access. "We wanted it to be universal," O'Rourke said.
Randolph-Brooks expects to be able to help its members more efficiently deal with the many checks it turns out they receive. Many of the credit union's members get checks from rental properties, sales franchises like Avon or even traditional payroll.
"We were surprised," O'Rourke said. "We thought the majority of people were paid with direct deposit."
Gaining Traction
There is no doubt that the concept of mobile check capture is gaining momentum among all audiences, according to Mitek Systems Inc. The San Diego company has a long history in image analytics and is generally credited with developing mobile capture. James DeBello, its president and chief executive, said he struck several deals in 2009 aimed at expanding the application's reach.
Mitek arranged with NCR Corp., Fiserv Inc. and RDM Corp. to integrate its mobile imaging software into those companies' remote deposit capture systems. It also agreed to integrate its mobile deposit application into ClairMail Inc.'s and mFoundry Inc.'s mobile banking platforms.
DeBello said there is "tremendous interest" from major banks that want to augment their mobile banking applications with check deposit.
Mitek is engaged in delivering mobile capture to "dozens" of large banks, none of which he named. "We believe 2010 is the year of mobile capture," DeBello said. "Several banks will be launching it."
(Bank of America Corp. is reported to be planning a test of mobile remote deposit technology, but has said nothing about it publicly.)
Mitek originally expected mobile check capture to be used by small-business owners on the go, such as plumbers, electricians and contractors who make house calls and receive checks in the course of doing their work. But after analyzing the market for the past year, Mitek now believes that consumers will make up the majority of users. "Consumers are very willing to use products that save time and are also convenient," DeBello said.
The USAA Effect
By far, the biggest thing in mobile remote capture is the positive experience of USAA Federal Savings Bank, the San Antonio company that serves military personnel and their families. USAA introduced its Deposit@Mobile service via the iPhone in August of last year, after adoption of its scanner-based check-depositing service for consumers, which it had unveiled in late 2006, began to slow.
USAA customers quickly took to the mobile service; in the first five months they sent more than 450,000 check deposits worth $260 million. The average check amount is just shy of $570. USAA has more than 70,500 users of its iPhone app, which has been downloaded more than 380,000 times and features Deposit@Mobile.
Many of the hundreds of comments posted on USAA's site praise the service or plead for the company to make it available on other types of smart phones. One user summed up the application's appeal: "Thanks USAA. This is truly fantastic. What a great idea. This is so much easier than either mailing or scanning."
While USAA's experience seems to set the stage for mass uptake of mobile check capture, the bank's distinction of serving a global customer base with just one branch sets it apart from others.
USAA's 7.2 million members, deployed all over the world, literally do not have the option of going to a branch to deposit their checks. They've been depositing checks remotely — through the mail or scanners — since the company's inception, making them a truly unique customer base.
Risk And Compliance
But are they really so different? Bob Meara, a senior analyst at the Boston market research company Celent, acknowledged that USAA is "an aberration" because it has only one branch. "But its customer base is not extraordinary," he said. "One thing the USAA experience demonstrates is that [mobile capture] is operationally very satisfying for a large number of consumers."
Still, there is the question of risk. In a survey of banks the company conducted in August, Celent found that the most common reason for not adopting mobile capture technology, cited by roughly half of respondents, was concerns over risk or compliance.
"The current risk and compliance concerns are powerful ones," Meara said.
But banks' fears of monetary losses are unfounded, Meara said, since there is little evidence to suggest mobile capture would lead to increased fraud. More legitimate is the fear of compliance risk since the current guidelines from the Federal Financial Institutions Examination Council do not make any explicit reference to mobile capture, he said.
These concerns over risk and compliance appear to be having an impact on adoption plans. Seventy-two percent of the banks Celent surveyed said they have no plans to deploy mobile capture, compared with only 49% that said they have no plans for scanner-based consumer capture.
NetDeposit LLC, which has been a leader in remote deposit software, is also working on a mobile version. In September of last year it rolled out NetCapture Consumer, which uses inexpensive scanners, and has struck a deal to offer Mitek's software in a mobile remote capture product that it expects to roll out this year.
The goal is to address end-user preference, said Danne L. Buchanan, NetDeposit's CEO. "Some people find a phone more convenient than a fixed scanner in the house or office," he said. But he does not necessarily expect rampant uptake of mobile capture. "To try to take a picture of a check is a little clumsy," Buchanan said.
Providers of mobile capture, however, contend that the process is smooth. Mitek, for example, provides instant feedback to users in the rare event that a check image is too blurry, dark or otherwise unusable. "Initially, it may take one or two tries to get it right," DeBello said. "It's just like getting a new camera."
Further, Mitek's ability to read the MICR line on a check image can match, and even sometimes surpass, desktop scanners, he said.
The software removes distortions, skews and shadows to create images that meet Check 21 quality standards and result in read rates that are as high as what a bank's back-office item processing systems can offer, DeBello said.
Low Barriers
Certainly, mobile capture has a lot going for it. Banks are likely to offer mobile capture for free, since it will not cost them much beyond a licensing fee to offer the service.
And most banks have already made the more hefty investment in back-office, image-based
Consumers, meanwhile, have shown themselves to be eager and adept at downloading all manner of applications to their mobile phones. Compared with running checks through a scanner, "mobile capture through a handset is frictionless," DeBello said.
Executives also say that mobile remote capture could help banks revamp their branch operations if a significant amount of check deposits that are normally handled by tellers are converted into electronic transactions.
Branch Impact
In fact, that trend is already happening. TowerGroup estimates teller transactions will amount to only 63% of branch activity in 2012, down from 73% in 2006. "A lot of that decline is due to RDC, whether mobile or scanner based," said Nicole Sturgill, research director, delivery channels at TowerGroup.
Zions Bank can attest to the impact of remote capture on branch traffic. The Salt Lake City bank, a unit of Zions Bancorp., which is the parent of NetDeposit, is a leading deployer of remote deposit services, with nearly $744 million of deposits coming in monthly via the service.
Since the bank started offering remote deposit in 2005, the number of live teller transactions conducted in its nearly 140 branches has decreased by nearly one-third, according to LeeAnne Linderman, the bank's executive vice president of retail banking. "We've seen a dramatic shift in why a client walks into a branch," she said. "We're doing a lot more advising and much more selling."
Zions has yet to offer mobile capture, but expects it will play into the bank' ongoing branch rationalization efforts.
"It's one of the many things we're looking at," Linderman said of mobile capture. "The definition of convenience will continue to be written. As it's rewritten, we will most definitely change our branch network."
Chris Costanzo, American Banker's technology editor from 1998 to 2002, is a freelance writer in Maplewood, N.J.
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