For Credit Unions, Mobile Deposits Are a Lifeline — But Are They a Fee Generator?

The camera appears as a small icon on most mobile phones. But for credit unions, it's a big part of ensuring their future viability against much larger institutions. And depending on whom you ask, it may also be a way to boost fee income.

Mobile remote deposit capture (RDC), or the use of the camera on a mobile device to create an image of a check for deposit, is expanding across financial services. While larger banks offered the service initially, credit unions and community banks are also quickly adopting mobile RDC, a move that can boost overall use of electronic channels. While almost all financial institutions want to boost mobile and web banking, it's vital for smaller institutions to do so to reduce service costs and accommodate the lack of a geographic footprint.

"We have noticed that when credit unions deploy mobile remote deposit, general usage of their mobile service increases also, sometimes significantly. Deploying mobile remote capture can draw a lot of attention to a credit union's mobile banking service," says Randy Thompson, product manager of CO-OP Financial Services, a tech sharing cooperative for credit unions that includes mobile RDC.

Other credit unions say mobile RDC has helped them serve members that are scattered from their core geographic region. "We have a large portion of our members from the University of Texas …mobile RDC helps parents make deposits for their children more easily," says Corina Watts, a senior manager for University Federal Credit Union, an 132,000-member Austin-based credit union that has about $1 billion in assets and lists 17 branches on its website, mostly located in southern Texas.

The credit union has about 26,000 mobile banking users, and approximately 20 percent of those have signed up for its Mitek-powered free mobile RDC offering during the service's first six months.

"While there are generally no operational differences between credit unions' and banks' mobile deposit services, mobile remote capture does provide credit union members with a very convenient means of making deposits and helps credit unions compete from an easy-access standpoint with even the largest financial institutions," Thompson says.

Tech firms such as TransCentra are using the software as a service (SaaS) delivery model as a lure to extend mobile RDC further into credit unions and community banks via lower deployment costs. This week, TransCentra introduced saas delivery for RDC, a solution that integrates with its mobile RDC product.

April Sumner, a product manager for TransCentra, says the low upfront costs and time to market of mobile RDC reduces barriers to adoption for smaller institutions. "Of course, the SaaS delivery model also means no software licensing and consistent support for software updates."

Sumner says mobile RDC service fees are typically transaction or subscription based, though they can vary. "For example, the customer may be interested in integrating mobile RDC with their current mobile banking platform, or they might need some data completion services."

While most institutions that offer mobile RDC don't charge a fee to consumers, there's the lingering question of how mobile RDC can and should be monetized. Tiffani Montez, a principal analyst for Forrester Research, says the relative lack of a branch network would make it harder for a down-market institution to charge a fee for mobile RDC. "In my mind, I'm not sure if you can charge $2 for a mobile RDC deposit when you don't have the branch distribution to support in-person deposits," she says.

Sumner says the "convenience factor" provides the value behind mobile RDC. "I would certainly pay 50 cents or even a dollar to skip a trip the bank …However, if the bank looks at the internal cost savings and competitive environment — most banks don't charge — then the not fee argument is a strong one as well."