Regions Offers Mobile Deposit — For a Fee

Regions Bank on Friday became the latest institution to roll out mobile deposit capture, but what may be most notable about the service is that it's charging customers a fee for using it.

The $121 billion-asset unit of Regions Financial (RF) said the cost of the service, which lets customers deposit a check by photographing it with a smartphone or tablet computer, varies with the willingness of depositors to wait for their money.

Fees range from 50 cents for an option that makes funds available in two business days to 3% of the amount of the check for immediate access. A third choice that costs $3 lets consumers cover charges against their accounts the same business day and tap the funds via their debit card or at automated teller machines on the business day that follows.

The move comes as a growing number of banks rethink their decision to not charge for mobile remote deposit capture. Though U.S. Bancorp (USB) announced two years ago it would charge for the service, most banks offer it as a value-add that spurs use of other services. In March, William Demchak, the president and incoming chief executive of PNC Financial Services Group (PNC), suggested the industry needs to figure out how to start charge for the technology, which has become increasingly popular with consumers.

Regions, of Birmingham, Ala., says the decision to charge for mobile deposit from the get-go reflects the cost of building the capability and the company's appraisal of the value consumers attach to it. "A lot of our decision was sound business sense," Scott Peters, Regions' head of consumer services, says. "Our research says consumers really value this service and they value the optionality we provided to them. We don't think the cost will be a major tipping point for the vast majority of consumers."

Peters says Regions knows some consumers may recoil at the suggestion they should pay anything for the service, but says the bank is betting most customers will compare the fee with the cost of driving to a branch or ATM. "If you just took the government's own estimate of cost of miles, what it suggests is that if you're more than about a third of a mile away from a branch, your round trip would be more expensive than using our standard availability," he says.

Regions offers mobile deposit to holders of deposit accounts and customers who sign up for the bank's prepaid Visa card. Peters notes that the bank bears the financial risk for funds that consumers choose to get immediately. "We've bought the transaction, so if the check is ultimately uncollectible, the customer has gotten their money and it's on us to collect the funds from whoever issued the check," he says.

Consumers seem to be sampling the service enthusiastically so far. Regions' mobile bank app, which is available via both Apple's iTunes and Google's Play, has been downloaded roughly 250,000 times since late March, when the company added the mobile deposit feature.

A majority of customers who have deposited checks via the app have selected the lowest-priced option, according to bank officials, who add that significant numbers of customers have selected the speedier processing, although the officials say it is too soon to draw conclusions from the numbers.

Regions' move is likely to garner attention from institutions eyeing charges for their versions of the mobile service. Bankers generally will be looking to see whether institutions such as Regions and U.S. Bank have blazed a path that others will follow.

"This has been an experiment worth watching because it illustrates the industry's struggles to edge away from the free-checking, free-services approach and to get customers to recognize and even put a price tag on the value of banking services," Mark Schwanhausser, a director for financial services at Javelin Strategy & Research, says in an email.

Schwanhausser says that more than any capability, remote deposit has spurred adoption of mobile banking by consumers who previously struggled to see the benefit of banking by smartphone compared with accessing their accounts online. Still, he adds, "Charging for mobile deposit takes away a little of the fun 'gee-whiz' factor."

The decision whether to charge for the service brings with it a mix of considerations that may vary by institution. Branchless banks that aim to appeal to tech-savvy customers should think twice before charging for remote deposit capture, according to Schwanhausser. "Putting a price tag on mobile deposit is not a one-size-fits-all answer," he says.

Kony Solutions, a developer of mobile banking software, and Chexar Networks, a check cashing technology company, collaborated with Regions on the development of the mobile app.