It's a gross understatement to say that small businesses aren't embracing remote deposit capture. Perhaps the better question to ask is how many small businesses even know what remote capture is.
"Less than a quarter of small businesses describe themselves as knowing what remote deposit capture is and understanding the real value proposition," says Christine Barry, a research director for Aite, who says that many businesses who do know about remote deposit capture (RDC) have heard about it from other businesses, not from banks.
By inadequately reaching out to small businesses, banks are missing out on fee income from RDC, and the chance to build other business and personal banking relationships with business owners. "Fifty-one percent of the small businesses that we spoke with say banks are not effective at educating them on what RDC is ... Our research shows that small businesses are price-sensitive, but they are willing to pay for some products if those products save the businesses time."
Fewer than 5% of small businesses are using RDC, Barry says, a paltry adoption rate considering the technology has been around for several years now and that it does two things that all small businesses really like: saves time and money. It's exponentially faster to deposit a check via a scanner, or even a mobile phone, than it is to drive it to the bank.
And there's an increasing argument in favor of extending RDC to small business clients, as well as all customers. Aite says the value proposition for banks to deploy the service has broadened. In new research, Aite says the technology has advanced to the point that the purchase of expensive equipment is no longer required, since the cost of scanners has come down significantly in price.
And Aite also says some new RDC applications work with three-in-one printer/fax/scanners that many businesses and consumers have in their offices or home offices. Additionally, mobile RDC reduces the cost of ownership and deployment even more, since the need to purchase hardware is all but eliminated, which makes RDC affordable for the smallest businesses.
It's the growth of mobile technology that provides a new use case for RDC, since the mobile channel is taking off among businesses and consumers alike. Bank investment in mobile technology is strong, among both large and small banks. Aite says that among the largest banks, 50 percent expect spending over the next two years on business mobile banking will remain high. Mobile financial services can be of particular benefit for small businesses, in which the owner requires broader access to business and financial information and transaction capabilities, yet is often traveling.
Yet despite the benefits of remote deposit capture and the opportunity to extend the service over mobile devices, the use of RDC by small business lags, part of a larger gap in service to small business that afflicts the financial services industry. And Barry says the RDC shortfall affects banks of all sizes equally.
Big banks with large complex IT operations aren't successfully using RDC to serve small businesses' needs. Nor are community banks, which would be well positioned from a branding standpoint to reach small businesses with new technology.
In the case of community banks, RDC can be of particular importance as a competitive leveler and a way to reach a key market demographic for community banks.
"[RDC] eliminates geographic boundaries, enabling banks to attract new customers and deposits, even in areas where branches and ATMs do not exist," Aite reports in a September 2011 report called "Community Banks: Maximizing the Small-Business Opportunity."
Aite says RDC provides a great deal of convenience and benefit to small business users — in addition to saving them time by removing the need to physically deliver paper checks to a branch for deposit, it offers other benefits, such as later in the day deposits and integration with their account systems for a more automated accounting process.
These benefits are mostly lost on the community bank segment, however, as Aite says only four percent of community banks are "extremely likely" to deploy a new remote deposit capture solution over the next two years, while only 11 percent are "likely."
And the paucity of technology for small-business customers goes beyond RDC.
"A lot of banks are still serving small business from their consumer platforms, so they aren't giving small businesses the ability to send wires or ACH payments or basic forecasting capabilities," Barry says. "So the small businesses are only using banks for checking balances and are using Quicken or QuickBooks to pay bills and create invoices. So there are a lot of tech firms that are starting to offer 'banklike' capabilities to small businesses."
There are banks that are trying to reach the small-business segment by tying RDC to other services, such as lockbox; or positioning mobile RDC as a way to allow business owners to make deposits while on the move. It's a sign that the small business RDC ice may finally be breaking.
"Banks are doing generally poorly at reaching small businesses with RDC, but they will get better at it. In the early days, the scanners were mostly designed for larger deposits, and were big and expensive. The total cost was significant by the time you purchased the tech and installed the scanners," says Bob Meara, a senior analyst in Celent's banking group.
Meara says scanners have become more accessible, and the adoption and familiarity of mobile technology will help spur RDC adoption for more small businesses — at least those that qualify to make mobile deposits. "Over the next couple of years, more banks will be introducing mobile RDC to small businesses," Meara says.
Fifth Third, which is making small-business banking a large part of its overall expansion strategy for the next year, has just introduced an application that directly links a multichannel remote deposit capture function with other automated services, such as Web access to a lockbox. "We look at RDC as a mechanism: if we're collecting payments for a small-business customer, he or she could automate the retail or wholesale lockbox through this app as well," says Patrick Wilcox, director of accounts payable and accounts receivables product management for Fifth Third, which licenses RDC technology from Wausau. "It helps the businesses automate the receivables process, and for a small-business owner, that's key to having cash flow."
Wausau is among a group of tech firms that includes FIS, Fiserv and VSoft that are expanding their RDC technology and services for small businesses. Wausau is bundling a series of services such as deposits, risk monitoring and training for users, a nod to the RDC knowledge gap of many small-business owners. "We've put tools into the application that show them how to use it," says Sam Golbach, Wausau's vice president of product management. The company has integrated its RDC system with recurring payments, such as cards or regular monthly bills, so business users can receive and view information on different types of payments via a single sign-on.
One of VSoft's clients, Union Bank, has adopted a new merchant capture, flatbed scanner and mobile capture solution that includes a simplified user interface and deposit workflow, account selection, scanning and risk-mitigation tools to track deposit volumes against established limits.
The bank did not make an executive available for an interview, but a spokesperson told BTN that the risk-mitigation piece allows the bank to produce profiles against which large numbers of small-business users can be mapped without the need for individual settings for each one. It's a move that makes RDC more cost-effective for the bank and thus easier to offer to small businesses at a lower cost.
Fiserv just introduced an RDC solution with a new user interface for merchant source capture based on user experience testing, new mobile and ATM source capture and remittance coupon source capture, which allows users to capture a check and stub to gather information for lockbox type processing. A Fiserv spokesperson told BTN the firm offers merchant, consumer and mobile source capture for small businesses, and said that the firm's user interface makes training easier. Fiserv has introduced an education and marketing program to help drive adoption of consumer, small business and merchant capture.
Another payment tech firm, Financial Transmission Network Inc., at the end of September introduced a remote deposit capture interface to allow resellers to offer a single solution to corporate clients of all sizes. The product includes a "lite" user interface for small businesses with a lower need for back-office integration.
