Consumers Gravitate Toward Mobile RDC

Depositing checks via mobile devices is becoming more popular, but security concerns remain.

July 29, 2013

Check deposits using mobile devices is becoming more popular among credit unions and their members, according to “State of Consumer RDC: The Death of Desktop” from Celent.

Fifteen percent of credit unions with more than $50 million in assets offer mobile/image deposit capture—and nearly 50% plan to introduce it in the next year, according to the 2013-2014 CUNA Fees Report.

Remote deposit capture (RDC) is becoming a viable self-service deposit channel for anyone with a scanner—a demographic that includes virtually all small businesses.

More popular still is mobile RDC, which invites the use of smartphones, through either a stand-alone application or as part of a broader mobile banking solution.

The customer segment using mobile remote deposit capture remains small, and fraud concerns continue to hinder rapid expansion.

Eighty percent of U.S. financial institutions plan to offer, or will consider offering, mobile RDC, says Celent. The firm estimates that the number of credit unions and banks providing the service this year will double to about 1,000 institutions.

Desktop RDC using scanners or multifunction devices still will be offered to small businesses, while financial institutions view mobile as the platform of choice for consumers.

“Widespread adoption of mobile RDC is a given, but it won't necessarily be easy," says Bob Meara, Celent senior analyst.

“Balancing regulatory compliance, risk management, and growing consumer demand will challenge many institutions," he adds.

Mobile RDC might result in reduced branch traffic, presenting a sales challenge to institutions with a strong cross-selling culture.

But deposit-related foot traffic comes at a significant cost. Weighing those costs with members' growing demand for these services could hasten a branch transformation for some credit unions.

While some financial institutions have tried pitching mobile RDC to small-business clients, most have found the service is efficient only for small independent companies.

Companies that deposit more than 100 checks each month will do better with traditional RDC services, while individuals or small businesses that deposit only a few checks a month might consider mobile.

Fraud concerns

The possibility exists that a customer could use the mobile service to electronically deposit a check at one financial institution and then physically deposit the same check at another.

While the automated clearinghouse should catch the matchup in identification numbers, it could take several days for that to happen and most institutions want to offer same-day or next-day funds availability.

As a result, most institutions begin by limiting the size of checks—maximum amounts range from $1,000 to $5,000—and offering the service only to longtime, trustworthy customers.

Still, fraud remains a concern. Although mobile RDC has seen few instances of fraud, regulatory requirements and the threat of fraudsters make this a continuing issue.

Phone camera images have proven to be of sufficient quality, mitigating industry concerns.

Institutions initially expected acceptance rates on mobile check images of less than 80%, but improved software that corrects for wrinkles or shadows has led to nearly 100% acceptance.

(Via E-Scan Newsletter.)