In Touch & Out of the Branch

Mobile banking is promoting people-to-people payments and remote deposits, helping CUs retain mobile members.

August 1, 2010
Mobile banking
• New mobile banking applications are moving transactions out of the branch, mailbox, or ATM, and onto members’ smart phones.
• Mobile RDC and P2P payments will prove their worth through cost savings and stronger member relationships.
• Board focus: Mobile banking will help retain members in today’s increasingly mobile society.

Smart phones bring a host of products and services to your fingertips—instantly. People who own smart phones have become accustomed to instant service.

That raises expectations for all service providers—including your credit union. So when you require a member to come into your branch to deposit a check or go to an ATM to get some cash to repay a friend, the process seems archaic. Technology has rendered some of the most basic financial services outdated. But that’s changing.

Vendors and credit unions are rolling out services that let members use their smart phones to execute a growing number of financial services. These services are keeping your mobile members out of the branch, but in touch with your credit union.

Mobile deposit capture

Many credit unions offer remote deposit capture (RDC), which enables members to capture check images via computer scanners or digital cameras and then deposit those checks online. Funds are credited to the member’s account according to the credit union’s funds availability schedule.

Although most RDC services can accept images from a variety of desktop scanners, some business members invest in multifeed scanners with magnetic ink character recognition capabilities.

Mobile RDC allows members with smart phones to take advantage of a similar process. A smart phone combines the functionality of a cell phone with advanced capabilities such as sending e-mail, accessing the Internet, or running applications that perform specific tasks.

Members at $3.8 billion asset Randolph-Brooks Federal Credit Union, Live Oak, Texas, deposited more than $33 million in checks with a scanner-based RDC service during the 12 months following the launch of the service in early 2009. Randolph-Brooks Federal added a mobile RDC option in April 2010.

“With members living in almost every state and many countries, it’s important to consider their needs, as well as the needs of members in our local footprint,” says Mary O’Rourke, assistant vice president, member service operations. The credit union’s field of membership includes highly mobile military members from Randolph Air Force Base.

Randolph-Brooks Federal’s mobile RDC service is currently available to users of Apple’s iPhone and Google’s Android 2.0 smart phone. The iPhone is used by 46% of the 47,000 members who access Randolph-Brooks Federal’s mobile banking site, while 16% use Android smart phones, and 15% use Blackberries. The other participating members use a variety of other mobile devices.

“Our intent is to provide this service across all mobile phone platforms and to be device and carrier agnostic,” O’Rourke says. “We’re still working toward this goal. Not all mobile platforms, however, provide the ease of development that the iPhone and Android do. So the challenge is making the service universally available to the majority of our members.”

As of May 31, nearly 2,500 members downloaded mobile RDC applications, making 1,380 deposits worth almost $700,000. Randolph-Brooks Federal hopes to expand the functionality presently available to mobile RDC users to echo its current mobile banking service, which includes secure messaging, balance checks, transfers, and other functions. Members will also have access to credit union news and updates through the application.

Rules and relationships

O’Rourke predicts mobile RDC will prove its worth through a combination of cost savings from self-service deposits and stronger member relationships. Risk is managed with rules that govern eligibility and account status (“Mobile deposit risk mitigation,” p. 38).

Randolph-Brooks Federal members who use RDC increased their household account relationships with the credit union by 2.25% in 2009, largely due to the opening of 4,504 new accounts including checking, money market accounts, individual retirement accounts, credit cards, signature loans, and vehicle loans, O’Rourke says.

“This number is difficult to move,” she notes, adding that mobile RDC has similar potential.

Equally important, O’Rourke predicts mobile banking will help retain members in today’s increasingly mobile society. “The day of closing your account when you move is over because you can do so much remotely.”

Mike Packer, business development executive for J&B Software, agrees mobile RDC helps credit unions with a limited branch footprint or those that serve members in a broad geographic area compete with national banks.

“As you move to mobile deposits, perhaps having a limited branch network becomes more of an asset and less of a liability because you don’t have that cost structure,” he says.

Vendors say mobile RDC’s appeal is due to the convenience it offers smart phone users of all ages, ranging from tech-savvy youngsters to Snow Birds—retired members who travel to southern states during winter months. Niche markets include small-business owners who take in a low number of checks.

Mobile RDC’s price tag—approximately 50 cents or less per transaction for a “mature” program that has been in operation for at least six months—also appeals to credit unions seeking to reduce the cost of processing deposits, says Alan Bernstein, president of Vertifi Software, a credit union service organization owned by EasCorp.

He notes that researchers at Celent have set the cost of processing deposits at shared branches at up to $3; $2 at an ATM; and $1.25 to $1.75 at a proprietary branch.

About 56 credit unions, including Randolph-Brooks Federal, have introduced Vertifi’s RDC service since early 2008. Many RDC programs are experiencing registration penetration rates of 10% among home banking users. Roughly 15% to 20% of all registered users make remote deposits in any given month.

The average check is for $700, with an average deposit size of $1,100. RDC clients have used Vertifi’s application to process almost $500 million in deposits, with losses of less than 0.5%.

Vendors typically offer mobile RDC services to credit unions through a software-as-a-service (SaaS) model where the vendor’s system hosts the software. This is accessed online via an interface set up by each participating credit union.

P2P payments

Mobile P2P services let members who use smart phones send money to other individuals in as little as one business day, without requiring the member to submit account information for the payment recipient.

Popmoney™ from Cash-Edge Inc. and ZashPaySM from Fiserv both offer P2P services to credit unions using a SaaS model. Members can access these services through a single sign-on to the credit union’s online or mobile banking systems. Fiserv also offers services directly to consumers who register on its P2P website.
CashEdge and Fiserv say mobile banking users are most likely to tap mobile P2P services, followed by online banking users. Users make an average of three payments per month.

Consumers want the convenience and security of making mobile P2P payments using services offered by financial institutions, says Erich Litch, Fiserv’s senior vice president and general manager of consumer services. P2P helps position credit unions to compete with larger financial institutions.

“The real battle for credit unions is how to become the member’s primary spending financial relationship,” Litch says. “Using payment transactional capabilities is critical for that.”

Risk is managed by placing mobile P2P behind the online banking login and by setting rules for the size and frequency of P2P payments.

Financial institutions can charge mobile P2P fees of up to $2 per transaction, with the potential to charge higher fees for faster delivery, says Manish Vrishaketu, general manager, business development and channel partners at CashEdge.

CashEdge launched Popmoney at five banks and two credit unions in late 2009 and early 2010. Another 167 financial institutions introduced P2P services in June 2010.

“It’s really about meeting consumer demand,” Vrishaketu says. Generation Y members are expected to be the heaviest users, but adoption is expected to spread across all age segments as awareness increases.

In the future, Vrishaketu says mobile P2P is likely to evolve in response to users’ desire to offer debit or ATM card options for payment recipients.

He says about 20% of P2P transactions are categorized as gifts.

A ‘natural extension’

Introducing mobile P2P services in April 2010 was a “natural extension” of electronic payment capabilities at $3.7 billion asset Patelco Credit Union, San Francisco, says John Shields, senior vice president of technology. Patelco has offered P2P services to online banking users since 2003.

“This area of mobile payments is growing and we want to be in on it,” Shields says.

As of June 2010, about 500 of Patelco’s 150,000 online banking users had used the mobile P2P service, launched in late April as a beta test within online banking. Promotional efforts will be coordinated with other pending improvements to the online banking system later this year.

While mobile transactions are still evolving, both vendors and credit unions note that adding transactional capabilities to mobile banking reduces processing costs while responding to member desires.

“Members want to do their transactions anytime, anywhere, and they believe money should move anytime, anywhere,” Vrishaketu notes. Mobile services make that possible.

How it Works

Mobile RDC
• The credit union selects a mobile RDC vendor and then writes or obtains an interface linking its mobile banking system to mobile RDC software applications.
• The credit union’s downloadable application is submitted to smart phone market stores operated by vendors such as Apple or Google.
• Once the application is approved, the credit union introduces the service to members.
• Members access online stores to download the credit union’s mobile RDC application to smart phones.
• The member uses the application to apply for the credit union’s service and register the device.
• Members use the smart phone’s camera to photograph the check. Image analytics convert the photograph into a format that can travel quickly and securely over mobile networks.
• The check image is submitted to the credit union along with the member’s deposit information.
•  The RDC system checks the deposit against the rules for mobile RDC users established by the credit union. If the deposit passes muster, it’s immediately credited to the member’s account.

Mobile P2P
• The member signs into the credit union’s mobile banking service and initiates a P2P payment by providing the recipient’s name, the amount of the payment, and the recipient’s mobile telephone number or e-mail address.
The sender doesn’t provide account information for the recipient. The recipient, however, must have a financial institution account to receive the payment electronically. Fiserv’s ZashPay offers the option of sending a paper check to users who lack an account.
• The recipient is notified of the payment by a short message service text message or by e-mail.
If the recipient is a member of a financial institution participating in the vendor’s network, the funds are moved directly to the recipient’s account in as little as one business day. If not, the member is prompted to visit the vendor’s website to submit account information.

 Mobile Deposit Risk Mitigation

Credit unions use these practices to mitigate mobile RDC risk:
• Multifactor authentication for member sign-in, which links a specific user name and password to a specific device.
• Data encryption.
• Transmitted images are deleted automatically upon submission.
• Limits on mobile deposits, such as the amount allowed per check or per deposit, and the number of deposits per day or per month.
• Member eligibility criteria, such as a credit score or an account history.
• Criteria to determine when a visual review of checks is required, including the first few deposits made via mobile RDC, checks over a specified amount, and mismatched amounts written on the check and the deposit information.
• Duplicate detection software to identify attempts to deposit checks that were previously deposited.


• CashEdge Inc.: 212-478-6000 or
•  Celent, Boston, Mass.: 617-262-3128 or
• Credit Union National Association,
1. 2010-2011 Credit Union Environmental Scan: select “products & services” and then “2010-2011 E-Scan Report.”
2. Technology & Spending Survey Report: select “products & services” and then “reports & surveys.”
• Fiserv Inc., Brookfield, Wis.: 800-872-7882 or
• J&B Software, Blue Bell, Pa.: 215-641-1500 or
• Vertifi Software, Burlington, Mass.: 800-428-1144 or