Mobile Solutions for Small Businesses
The irony is that small-business owners are too busy to embrace time-saving technologies.
Many small-business owners have undoubtedly heard about remote deposit capture (RDC), and they’ve seen people make deposits by taking pictures of checks with their smartphones. But incorporating those time-saving technologies into their small-business operations will have to wait—because these business owners are just too busy.
Jeff Mack, CEO of Cachet Financial Solutions Inc., compares the present situation with RDC and mobile banking services to the early days of the ATM. When ATMs first came on the scene, Mack says most financial institutions doubted consumers wanted 24/7 access to their cash. After all, consumers didn’t know that lack of access to cash was a problem needing a solution.
But the convenience soon caught on. Today, nearly 300,000 stand-alone ATMs nationwide routinely dispense cash and perform other financial tasks. Mobile banking seems to be following a similar adoption trajectory with consumers. But small-business owners have been slower to embrace these new technologies.
Educating small businesses
Mack says small-business owners have yet to learn just how much they can benefit from RDC and mobile banking.
Credit unions that educate businesses about the value of easy-to-use RDC and mobile solutions are positioned to retain valued lending relationships and win over new members.
“You have to help businesses envision the possibilities,” Mack says. That requires on-site demon-strations to show business members how RDC can change their workflow and provide same-day ac-cess to deposited funds.
You can deliver RDC services in two ways:
- Desktop solutions rely on a scanner linked to a personal computer. Consumers and microbusi-nesses typically provide their own flatbed scanners, while larger businesses either buy or lease scan-ners with bulk feeders so they can quickly process multiple checks.
- Mobile solutions use a smartphone to take and then transmit photographs of the front and back of the check.
Both solutions rely on vendor software to use an Internet connection to make deposits, verify that users comply with deposit limits and other rules, and integrate RDC with other services.
Pick your target
Leading RDC vendors say a thorough understanding of small-business owners’ needs can help credit unions craft the right strategy.
Microbusinesses are apt to have straightforward deposit needs that can be easily handled by a mo-bile RDC solution, says Larry Middleman, CEO of CU Business Group. The company offers RDC services to credit unions through a partnership with BankServ.
Middleman says larger businesses will want more options and more sophistication for both online business banking and desktop RDC. These enhanced options include the ability to share account ac-cess with a variety of employees or others who serve their business. Businesses are typically willing to pay a monthly fee for these services.
“You need to decide what your target market is,” Middleman says. “We’re seeing a lot of credit un-ions trying to ramp up their package of services to attract a larger, more sophisticated, more profitable business relationship to supplement the commercial loans they may already have on the books.”
Integration with online banking and other services makes RDC user-friendly for businesses, but Middleman notes that integration increases implementation costs and complexity, making it difficult to recoup costs with monthly fees.
“A simple, Web-based system that allows you to outsource a lot of the processing to a larger vendor can be a cost-effective option for many credit unions,” Middleman says.
The mobile approach
If a credit union decides to offer both desktop and mobile RDC, it’s advisable to implement them one at a time within a long-term strategy that guides business services, according to Gary Brand, director of Source Capture Solutions® for Fiserv.
Financial institutions typically introduce desktop RDC first, but credit unions should bear in mind that demand for mobile RDC is likely to grow.
“Most consumers and most business owners are looking for a single place to go for services from a financial institution, whether it’s from a laptop or from a mobile device,” Brand says.
Owners of small businesses are willing to switch financial institutions to obtain those services. Brand offers the example of a Texas irrigation company that changed financial institutions so it could equip the drivers of its three service trucks with smartphones that allow them to use mobile RDC to deposit clients’ checks at the point of service.
Due to their small number of employees and relatively simple needs, microbusinesses are likely to take advantage of mobile RDC solutions designed for consumers, according to Calvin Grimes, Fiserv’s product manager of mobile services. Grimes predicts consumers and microbusinesses will show a “staggering” demand for mobile RDC in the months and years ahead.
Both types of RDC should be part of a package of services aimed at meeting the long-term needs of business members.
“The challenge will be how you bundle services in a package that makes it a compelling offer the business will be willing to pay for,” Brand says.
Next: More than deposits
More than deposits
Over time, businesses are likely to look for RDC solutions that can be integrated with mobile banking, payment processes, payroll, and insurance policies.
“In this new market, where businesses are going to run their operations by tablet or mobile phone, businesses are going to deal with the institutions that will put them into the technology they need,” says Barry Sloane, CEO of Newtek Business Services, a CUNA Strategic Services alliance provider.
Sloane says credit unions should analyze RDC vendors on their ability to meet three criteria:
- The right hardware and technology for business members to interface with the credit union;
- Software and solutions that allow the credit union to effectively manage RDC; and
- Training to help employees and businesses learn to use RDC and deal with problems.
This approach can help credit unions compete with big banks to serve small
businesses, says Sloane.
“Evolving technologies offer credit unions great opportunities because many banks have legacy products and services that are outdated,” he says. “So if credit unions step up to the plate and embrace the business market with state-of-the-art mobile devices and RDC, they can capture a significant piece of this
A smaller footprint
RDC can help credit unions compete in a wider geographic area despite a smaller branch footprint, according to Bill Phillips, EPS group president at ProfitStars, a division of Jack Henry & Associates.
“RDC minimizes the need to have convenient physical locations, creating a more cost-efficient way to serve members,” Phillips says. But competing effectively requires educating your frontline staff so they can explain the advantages to business owners.
North Island Credit Union, San Diego, Calif., used RDC to offset the inconvenience caused by closing seven of its 17 branches during the recession, according to Robert Reck, first vice president, and Johnny Galvan, cash manager, of the $1 billion credit union. North Island has offered a desktop RDC solution since 2008 relying on an application service provider.
“After we closed those branches, half of our business members chose to use RDC,” Galvan says. The 44 business members currently using RDC represent more deposit item activity than all but two of North Island’s branches. RDC users must meet underwriting standards that are similar to business loan requirements.
The smallest users are “mom and pop” shops that make a handful of deposits each month. The largest users make about 40 deposits a month to a single account, with many businesses having multiple active accounts. North Island also uses RDC to streamline deposit services for a small credit union.
North Island charges $35 per month for its basic business account that allows 20 monthly deposits. The fee is waived for businesses that maintain $50,000 in their accounts. If North Island provides the scanner, the member pays the monthly fee, plus eight cents per item and additional fees.
Reck notes that aside from cost savings, benefits to business include the ability to upload transactions into Quicken and spreadsheets, archive images, conduct research, and generate reports. “It has enhanced functionality you wouldn’t get when you just drop a deposit off at the teller window,” Reck notes.
Two cash-management employees visit businesses to establish the service and train staff. Videoconferencing helps them efficiently solve ongoing problems, which are typically caused by security upgrades or other issues unrelated to RDC software.
North Island tentatively plans to develop mobile banking and mobile RDC, which would open the service to Apple iOS users who can’t access the current RDC system.
Members 1st Federal Credit Union, Mechanicsburg, Pa., refined its RDC program by offering free services to a business in exchange for frank feedback of the pilot service, according to Marva Nabors-Moore, EFT services manager.
The $2 billion asset credit union launched ProfitStars’ RDC solution 18 months ago and now serves 11 businesses. Business relationship officers approach potential users and offer to conduct an on-site analysis of RDC needs. RDC users also must satisfy underwriting standards.
About half of RDC users are located in rural areas where distance from a branch makes it impractical to travel for regular deposits. Members 1st Federal sometimes waives its $50 monthly fee for three to six months to attract new users.
Each business receives a scanner, a training manual, and on-site training and testing. Nabors-Moore and an information technology employee offer ongoing support via videoconferencing, while ProfitStars offers after-hours help via video¬conferencing.
Nabors-Moore says business members like the simple RDC process that concludes with an email confirming the deposit. When an RDC deposit contains errors, the email provides details. A copy is sent to risk management and collections staff so they’re aware of potential problems and can review the business’ financials.
“You’re going to be aware every step of the way if there’s something wrong,” Nabors-Moore says.
Members 1st Federal also offers desktop RDC to consumers, who use their own flatbed scanners and are limited to deposits of either $1,500 or 100 checks a month. A “very small pocket” of users are microbusinesses, typically members who sell products such as Pampered Chef or Avon.
Mobile RDC is tentatively scheduled for launch in the first half of 2012. “Our initial offering will focus primarily on consumer needs, but we do recognize this service will probably be used by small office/home office types of business,” Nabors-Moore says.
Next: Relationships matter
Offering RDC encourages business members to rely on our credit union for all their deposit and lending needs, according to Kent Bouma, business services manager for the $755 million asset Whatcom Educational Credit Union, Bellingham, Wash.
Bouma says some business owners declined to shift business loans to Whatcom before it launched RDC in the spring of 2011. Now, 10 businesses use the service.
“It’s made a significant difference to some businesses,” Bouma says.
Whatcom researched desktop RDC options for a year before introducing the solution offered by CU Business Group. Bouma says businesses appreciate the ability to sign up for RDC and automated clearinghouse services at the same time.
“That piece is important, too, because businesses can now do their payroll and direct deposits to employees through one portal,” Bouma says.
Over time, Bouma expects business RDC to continue to strengthen relationships. Once businesses experience the convenience of RDC, they might be unwilling to accept anything less.
RDC BEST PRACTICES
Remote deposit capture (RDC) vendors offer these best-practice tips to credit unions exploring RDC for member businesses: