USAA is no longer the only financial institution offering consumers the ability to deposit paper checks from the comfort of home using standard home scanning technology (see previous coverage here).

Through DepoZip, a new offering from Massachusetts-based corporate credit union, EasCorp, five northeastern credit unions have recently begun offering remote deposit capture services for their members. In addition, Austin, TX-based Randolph-Brooks FCU is slated to launch it later this spring.

According to its published prices, the cost is $15,000 to implement the program ($5,000 for the license and $10,000 for training), then $100/mo plus $0.40 per active user plus $0.01 per its plus applicable image processing fees which range from $0.03 to $0.14 per item. Compared to manually handling deposits at the teller window, that's a bargain. 

The service was piloted beginning in August last year and launched in November at Sharon Credit Union (see inset image) and Hanscom Federal Credit Union. The latest to roll it out is 300,000 member Digital Federal Credit Union. 

Judging by the title and the date of this post,  you might think it a prank.

But no, Mitek Systems has actually developed software that lets you deposit paper checks by taking their picture with your mobile phone and transmitting the images to your bank. The company has a good demo of the service on the product page.

The company first demo'd it to bankers at BAI's Transpay in early February (press release here). I wasn't there but I heard it was a must-see on the trade show floor.

Here's how it works:

• Call up the app on your phone (first-time users would need to download the app from the bank)
• Log in
• Enter the amount of the check
• Take a photo of the front of the check
• Wait for the software to optimize the photo
• Take a photo of the back of the check
• Wait for the software to optimize the photo
• Transmit it to the bank
• Receive a confirmation message from the bank

Analysis
I'll admit, I didn't see this one coming. And I still can't decide if it's a good idea. On the one hand, it's cool and innovative and allows you to do something on your mobile that you really can't do on your PC (although a digital camera hooked to your PC could do the same thing). I could imagine a smaller service business with just a couple checks per month using it. The photo documentation of the deposited check would be handy to have and a dedicated check scanner is too pricey (note 1).

But for consumers? Not many would go through this much trouble to deposit a check. It would be easier to drop it in an ATM, the mail, or walk it into their branch during lunch hour. And no major business can use it. Biz owners don't want their bookkeepers snapping photos of customer checks with their Razr. 

If you have a massive tech budget, it might be worth the cost to demonstrate that you are the leading innovator in your market. Or if your mobile banking vendor can deliver this capability within a larger mobile banking system for little or no extra cost, give it some thought.

But if your are already behind on your 2008 plan, your budget fits on the display of an eight-digit calculator, or you are still haven't gotten around to creating an iPhone button for your bank, this is not the project for you.

Let me know what you think.  

Note:

1. CheckFree or USAA's system using existing home scanners might work better for most small- or micro-businesses.

While you don't want to overdo it and look like a hypocrite (see note 1), there's nothing like a little green to spruce up your marketing this time of year. BankServ lets users see just how much they can save by uploading checks to the bank over the Net instead of hightailing over to the branch in their Hummer (note 2).

In my case, I'm only going to save a half barrel of oil per year by forgoing those branch visits. Less, if it ever stops raining and I can get back to biking to the branch. It sounds more impressive in terms of CO2 emissions saved: 200 pounds.

It's a nice tool. Financial institutions could also use similar calculators to show the green benefits of paying bills online, receiving electronic statements, or anything else that cuts down on waste.

Note the URL: http://www.bankserv.com/greenbanking/

Note:

1. The term is new to me, but my friends over at Javelin Strategy blogged about greenwashing this week. In short, it means misleading consumers about the extent of your eco-friendly practices.

Although, remote deposit capture has captured a significant share of larger businesses, consumers have had fewer options:

• USAA has offered in-home scanning, called Deposit@Home, for more than a year (previous coverage here), but its customer base is limited to current and retired members of the military.
• DepositNow, a unit of BankServ, allows anyone to use remote deposit services, but it's geared towards businesses and costs at least $29/mo, far above what consumers or even smaller businesses will pay.
• A number of banks also make it available to small businesses and the very wealthy, but consumer rollouts have been nonexistent. The cost of a dedicated scanner makes it uneconomical for the mass market.

CheckFree aims to change that with a new service targeted to consumers and very small businesses (press release here). The key is using existing consumer scanners and multi-function printers. USAA has proven that this technology does indeed work, so we expect CheckFree's service will pass technical hurdles.

It's hard to predict consumer demand, but given that around 20% of U.S. households maintain a full- or part-time business endeavor, we expect strong demand if the price is reasonable and technology is extremely easy to use.

Remote deposit services could be used as the cornerstone of a premium online banking offering (note 2) attractive to microbusiness (note 1) owners and consumers who still receive paper checks a few times per month.

Notes:

1. We define a microbusiness as one with $50,000 or less in annual revenue, typically a part-time, home-based business. For more information see Online Banking Report #107/108: Small and Microbusiness Banking Online.
2. See Online Banking Report #109 for ideas on how to create a premium online banking channel.

It takes a long time before a new process or technology becomes "conventional wisdom," something that is accepted at face value without questioning its pros and cons. While we are still years away from that happening with remote deposit technology, at least the mainstream press has picked up on its benefits, one of the first steps towards mass adoption.

The latest example was in today's Wall Street Journal special Small Business section. In "Branching Out," a general article on banks' growing interest in small businesses, author David Enrich prefaced an Aite Group "levels the playing field" quote with this (p. R6):  

Remote deposit makes it less important to select a bank based on its location or number of branches--which many big banks tout as a key selling point.

Analysis
The key take-away here is that banks should make sure remote deposit services are prominently featured in checking/cash management offers aimed at attracting new business clients. 

For example, PNC Bank is currently running a remote deposit promotion with a free scanner for customers who sign up before the end of April (see landing page screenshot below). The service is powered by Bankserv (PNC data sheet here;

The promotion is well-placed on Google, with the fourth-highest AdWords placement giving PNC the top-right slot (see inset).

However, neither the promotion or remote deposit are mentioned on the bank's main business checking account marketing page (see second screenshot below). We like the promotion, the first we've seen advertising a free scanner via Google, but the bank seems to be missing the chance to grab new accounts with the freebie.  

PNC Bank landing page from Google search on "remote deposit capture"
(Seattle IP address, 19 March 2007, 9 AM PDT)

PNC Bank main business checking page (19 March 2007)

No matter how comfortable and convenient your branches are, forcing customers to rush to the branch to cash a check before closing time is not helping cement the relationship. And it leaves you vulnerable to competitors with longer hours or branches that are closer to your customer. And extending hours into the evening and weekend may be great for the customer, but its tough on the bottom line. 

That's what makes Wells Fargo's latest move doubly smart. Because deposit/check-capture ATMs automate the check cashing process, the main reason customers visit a branch late in the day, the machines can serve almost like a virtual branch for many users.

So Wells Fargo is leveraging its so-called "Envelope-free" ATM network to provide what amounts to extended branch hours, providing same-day credit for checks deposited in its Envelope-free ATMs to 7 PM. By adding three hours to what was a 4 PM cut-off, the bank instantly has a network of 1200 extended-hour locations (see Note 1) for a fraction of the cost of keeping branches open an extra 10 to 15 hours per week.  

As remote deposit capture becomes a key selling point for banks, we expect deposit cutoff times to disappear altogether, just as many bill payment systems now allow payments to be initiated up to midnight for same-day processing. 

Notes:

1. The bank announced Tuesday that it will be expanding its network of envelope-free check capture ATMs to 1200, from the current 400 (see press release here). The Wells Fargo Envelope-free page is here.

Recently, we've focused on one aspect of paper-check conversion, so-called remote deposit capture, where a business deposits paper checks by converting them into electronic items instead of driving them to the bank. It's an important new service that benefits both the bank and the end user.  

However, there is more to this story than saving businesses at trip to the branch. There is also a significant opportunity for capture at branch locations, including:

• Capture at the ATM (in-branch or off-site)
• Capture by the teller
• Capture by the customer at an in-branch kiosk)
• Hybrid model with customer doing some of the work with the branch staff assisting 
• Capturing in the branch back office (i.e., not at the teller line, but later in the process)
• Capture at a third-party such as a UPS Store or check cashier

An insightful summary of the issues was published Friday by Gonzobanker's Terence Roche  http://www.gonzobanker.com/article.aspx?Article=314. Previous Netbanker coverage is here.

As mentioned in our earlier post (here), there is relatively little advertising activity on the search engines for remote deposit capture services.

However, when it comes to website marketing, a number of community banks are featuring the innovative service front and center (see screenshots at the bottom of this article). 

• First Mutual Bank <firstmutual.com>
• 1st National Bank of Arizona <fnbaonline.com>
• National Bank of Arizona <nbarizona.com>

However, even though these banks are using their most valuable online real estate to promote the service, in most cases there is little information on how it works, how much it costs, or whether it would work for smaller businesses.

To properly market remote deposit capture to smaller businesses, look at how how high-tech companies market new products – almost always with an an online demo and frequently with white papers, spec sheets, and free trial offers.

As mentioned previously, Wells Fargo is using a white paper to explain the service and capture leads (see post here). In terms of demos, Nevada State Bank, <nsbank.com> a $3.4 billion unit of Zions, has an excellent one (see screenshot below). 

Action items:

1. Create an online demo to educate the market on how remote deposit capture works
2. Post detailed information on features, benefits, pricing, how to use, FAQs, testimonials, amount of deposits captured to date, and so on
3. Capture leads from the product-info page
4. Use Google and other search engines to market the service
5. Offer a free trial

Homepage screenshots:

First Mutual Bank 

1st National Bank of Arizona

National Bank of Arizona

Remote deposit capture is one of the most significant new technologies to hit online business banking since, well, online banking. According to Celent, 60 of the largest 100 banks, including 20 of the top 25, now offer it. In addition, hundreds of smaller community banks now offer it.

So why can't I find it through Google? (see note 1)

For two years I've been coveting the service and waiting for my bank to offer it to small businesses such as ours. I'm still waiting.

Today, I happened to see it mentioned on the homepage of a local community bank here, First Mutual Bank (see screenshot below).

Not wanting the hassle of moving my account relationship, especially to a bank on the other side of Lake Washington (a major traffic hassle), I tried a little Googling to see what other banks in the area might have it. 

It fails to show up in the organic results, and only two banks, Wells Fargo and Main Street Bank <mstreetbank.com> are advertising on "remote deposit capture" and the shorter "remote deposits." Main Street Bank is located out of state and Wells Fargo, while just up the street from my office, appears to target its remote capture to larger businesses. I'd be willing to pay $20 to $30 a month for it, but I'm guessing that's not even close to the Wells Fargo commercial customer price.   

Action items (see note 2)

1. If you offer remote deposit capture, make sure you have a dedicated page touting the features and benefits.
2. On the dedicated page, make sure you use the term "remote deposit capture" in addition to any cute name you've branded it with. That will help users find it on search results.
3. Market it through Google and other search engines. At this point, it doesn't appear that there's much competition for ads, meaning your cost per click should be low.
4. Create a landing page that captures leads for your business banking officers. Check out Wells Fargo's approach at https://www.wellsfargo.com/com/boc_campaign
   (see screenshot below)

Notes:

1. I am searching from a Seattle IP address. In other markets, there may be financial institutions using Google to market remote deposit services.
2. We will post an additional article on remote deposit marketing later today

In a press release yesterday, USAA, which serves many of its 5.6 million members remotely, announced the availability of its Deposit@home remote deposit capture service. It's the first major remote deposit capture service geared towards consumers. There are no fees for the service.

Previous services have been targeted to businesses who could justify the $300 to $700+ cost of a dedicated on-location paper-check scanner (see prior coverage here). USAA's service works with any 200 dpi or better scanner hooked to a Windows 2000/XP computer, so households with a dedicated scanner or multi-function printer will not be required to add hardware.

Deposit@home has been rolling out to selected customers since mid-November. To reduce risk, the service is only available to credit- and insurance-qualified checking account customers.

It's being positioned as a replacement to the UPS/NetBank QuickPost service that was abruptly discontinued by NetBank in a cost-cutting move (previous post here). QuickPost allowed USAA customers to overnight deposits free-of-charge from any UPS Store. There is no word on when or if it will be available to all USAA checking account customers.

Because of its limited availability, it has not been featured on USAA's website. Invitations were sent by email and the option was added to the menu within online banking. However, the feature was used in an online promotion for the Lackland Airfest 2006 a month ago (see mention in upper-left here). 

Here's a screenshot posted on the USAA thread at FatWallet:

Analysis
Assuming the service works as promised on in-home scanners, the ability to submit deposits remotely should help financial institutions compete for checking accounts outside their geographic footprint.

Winners: Direct banks, credit unions, and smaller banks with limited branch networks; also, remote deposit technology providers and printer/scanner manufacturers

Losers: Any financial institution that doesn't offer remote deposit options; branches

The first remote deposit solution using a generic document scanner will launch in July, according to its developer Community Bank Systems <bankimage.com>. Without the requirement of buying a $300+ check scanner, remote deposit services will be able to capture a large number of small and micro-businesses.

Analysis
We'll reserve judgment on CBS's ePosit solution until we have more details, but this could be an important way to grab more share of your area's small business customers. And it will make a good copy point for personal checking accounts, though most consumers won't want to learn a new system to deposit a couple checks every month. Conversely, if you lag on adopting this new technology, you may find yourself vulnerable.

As a matter of fact, we could envision a long-term branding campaign around better deposit taking, from reduced hold requirements, deposit-item images available via online banking, and the convenience of 24/7 remote deposit of paper checks. Read some of the rants at HomeStreet Bank's <mybankdoesntgetit.com> site and you can see that deposit INconvenience creates some strong feelings (see this rant and this one).

--JB

If there was one universal recommendation from BAI's TransPay Conference it was this:

Offer remote deposit capture NOW!

Remote deposit capture, the scanning and depositing of checks from the user's own location, rivals online banking in terms of utility for businesses of all sizes. In an interesting general session yesterday, three small business principals from companies in the $5 million to $10 million category were on stage with two bankers. When the subject of remote deposit capture came up, two business owners were ready to install the system immediately. The third only received a few checks each month and wasn’t interested, however he said his spouse who runs a retail operation is very interested.

The business owners were willing to pay a considerable fee since it would save many hours of labor each week. And maybe more important, they liked how it made remittance processing easier to manage. With small staffs, they often have to find replacements to make the "bank run." And sometimes checks sat idle for days at a time when someone was unexpectedly sick.

Main Street Bank <mstreetbank.com> features check scanning in its Main Street Connect package.

The predicted remote deposit capture adoption curve resembles online banking in the late 1990s. Celent estimates there will be 100,000 remote locations by the end of this year, about 5% penetration of the corporate market. In five years, the research company predicts more than 1 million business locations will use the service, along with a quarter million branch locations for 1.4 million total locations in 2012 (see below).

Source: Celent, 5/06

So far, only 50 or so banks are offering, but all top-20 banks either have it now or are in the final testing phase. By this time next year, as many as 500 banks may offer it, and it will soon be an expected part of a full-service, business-banking offering.

--JB

Wondering what to call your remote deposit-capture service? Just wait a few months and Bank of America will solve that problem for you. The bank, and its $175 million advertising budget (see NetBanker May 17), is on the verge of making check-scanning ATMs a household name.

According to last week's Wall Street Journal (May 8), "The Envelope-Free ATM," BofA will use television to trumpet the new feature as it rolls out 1700 next-generation ATMs by the end of the year. Bank of America has an ATM base of 15,000.

As you recall, the last time BofA used its advertising budget to push a new high-tech feature, free bill pay, in 2002, it set off a chain reaction that has resulted in bill payment being free at most U.S. financial institutions.

We expect the BofA advertising to be the beginning of mass adoption of check scanning at ATMs, self-service teller-assisted stations in branches, and for business customers, in-home/office devices.

Analysis
Today there are only about 4000 check-scanning ATMs in the United States compared to 396,000 conventional machines, so it will be years before there is a critical mass of the new machines. TowerGroup predicts that 25% of the 200,000 bank-owned machines will feature check imaging in 2010 (see chart below).

Financial institutions of all sizes should accelerate their plans to harness the technology. As the branch network is downsized, this is one of the ways the impact on consumers will be minimized. The extra $10,000 to $15,000 per ATM expense is relatively insignificant considering the labor savings from the device. TowerGroup estimates a 75% decrease in processing costs to just $0.40 per item compared to $1.70 for checks deposited with a teller or by means of an envelope dropped into an ATM. That means the breakeven is often less than 10,000 deposited items per machine, assuming the bank is able to reduce back-office or branch labor. This does not include the expected lower fraud costs.

However, this particular technology is more about customer satisfaction than cost reductions. Customers will love this system once they understand it. Not only is there instant feedback with an image of the deposited items, users also get the peace of mind of being able to access the image through their online bank system. Yet, another way that online banking adds value to the relationship.

--JB

Few innovations of the past five years can top Pennsylvania State Employees Credit Union's (PSECU) Upost@Home service. Launched in late 2001, the service allows qualified members to enter deposit items online for instant credit to their account. Members then send the paper items to the CU through the mail for reconciliation.

The service was named an OBR Best of the Web winner in 2003 and earned the #23 spot on the OBR list of the Top 25 Innovations of All Time (see OBR 103).

Now the service is being marketed to other financial companies through PSECU's CUSO affiliate, eCU Technologies. The service is already in place at Southland Civic Credit Union and Deere and Company Credit Union.

As part of the marketing effort, eCU has released updated metrics on the usage at PSECU and the estimated cost savings:

Total deposit sessions: 700,000
Total deposit dollars: $300 million
Deposits per session: $430
Total losses: $13,000
Losses as a percent of deposits: 0.4 basis points (0.00004)
Losses per deposit session: $0.02
Savings per deposit session (vs. teller or ATM): $1.14
Total program savings: $800,000

Action Item
Specific results from three credit unions along with program details will be discussed at a free Webinar May 23. We urge you to attend.

--JB

Last year, NetBank was one of the first banks to talk about allowing business customers to deposit checks directly via scanner, so called remote image capture or remote deposit capture.   

NetBank has yet to go live, but several others have including: First Tennessee (the first to go live in March 2004), Bank of New York (announced 08 Nov 2004, see inset), HSBC (announced 08 Nov 2004), Wachovia (announced 13 Dec 2004), BB&T (announced 10 March 2005, live 01 April 2005).

Also, know to be implementing or testing: PNC, E*Trade Bank, Bank of America, LaSalle Bank, JPMorgan, BB&T, Mellon, Citibank, Key Bank, Zions, and Glenview State Bank (IL).

Now you can add Wells Fargo to that list.

Last week, the online banking pioneer announced its extremely well named remote deposit capture service, Desktop Deposit. The service allows businesses to scan checks into their PCs using a USB device from the bank. No word yet on pricing and availability.

Analysis
Remote deposit capture, either at the customer's PC or at a scanner-equipped ATM, has the potential to negate one of the branches last roles, check cashing. It could be especially appealing to small businesses who benefit from the obvious time savings (no more trip to the bank) and better cash flow (no stashing checks away until the weekly bank run).

But the more important benefit to businesses are the improved record keeping and easier resolution of billing disputes. Images of deposited items are available immediately online and can be easily searched, retrieved, and forwarded, should a question arise later. Finally, the business retains the original paper item for a back-up paper trail.

And given the large value to the business, banks should be able to increase checking account and/or online banking fees for remote-capture clients, thus profiting from a process that wrings paper checks out of the system.   

Resources:

• NetBank Announces Remote Deposit Scanning Service">, NetBanker, 24 May 2004
• The Tech Scene: Remote Image Capture - Small Banks React, American Banker, 6 April 2005

-- JB

According to an article in the May 20 American Banker, NetBank is about to launch a remote deposit service for its business customers. Although details of the yet-to-be-launched service are sketchy, it is expected that business customers would scan paper checks into a remote device that transmitted the images to NetBank for immediate deposit.

This service has two important benefits in addition to the obvious: freeing small business owners from a trek to the branch:
1. Improves cash flow since checks can be deposited immediately rather than on periodic trips to the branch
2. Streamlines record keeping in two ways:
(a) the original check can be filed as a paper receipt
(b) an electronic image is stored at the bank and is available if questions arrive

The service is not expected until August at the earliest. The technology provider is Alogent.

Speaking as both as a small business owner and an industry analyst, this is a great service and a strong candidate for an Online Banking Report Best of the Web award once the service becomes operational.