BID® Daily Newsletter
Feb 21, 2008

BID® Daily Newsletter

Feb 21, 2008

THE NEW REMOTE DEPOSIT CAPTURE TREND


Over the last 2 days, we discussed several aspects of profitability for remote deposit capture. Today, and to close off the topic for the near-term, we want to discuss a current trend - consumer remote deposit capture.
Now, we are not big fans of banks attempting to be both a consumer and a commercial bank (at least for its first 5Ys of operations), but if you are, the retail application of remote deposit is a must have.
Consider a recent USAA Federal Credit Union announcement that they now have 230k members remotely using its Deposit@home service processing 13% of all its items. There are no fees for this service, households use their own flatbed scanners (45% claim to have them) and yes, fraud rates are higher. We will let you do the math when it comes to the amount of deposits this service takes in, but we can tell you that it is approaching 9 digits before the decimal place.
Think about this for a second - while our banking industry has been sitting around complaining about rates on deposits, this credit union rolled the dice and took a chance on changing the face of the industry. We have spoken to a dozen of their customers and they love the service. They complain about the security and the limitations, but they understand it and wouldn't switch to a bank for less fees or higher rates.
So what are going to do about it? Here is an idea - To start, take your existing scanners, make some minor modifications to both the set up and your procedures and offer to tie it into retail checking via your existing scanner network. Instead of just selling a business package, call it an "Employer bundle" and allow the employees of your business customers to utilize the scanner during lunch time and break hours. In other words, make your scanners work double duty in order to capture more customers and deposits. Fixed costs remain the same and the additional deposits cover the additional charges.
While this might not be profitable right off the bat, what it does is to attract new, service-oriented customers. It also drives one of the most unprofitable transactions at the branch level to a cheaper channel. This frees up your branch to be more sales focused and less transactional.
None of the large banks have this program in place although we know several are looking at it. Going after the small business retail customer using a flatbed scanner has its issues (support and fraud), but these are being overcome in various ways. Our point to this series on RDC was to highlight some profitability strategies and get banks thinking about their next set of RDC objectives. Like "W" hotels, while the path is dimly lit, RDC is still one of the hippest places to be.
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