The Mobile Revolution: Remote Deposit Capture
The tablet revolution. The post-PC era. The smartphone explosion. No matter what label resonates the most with you personally, the idea is the same: personal computing is changing. People are spending more time with smaller devices, such as tablets and smartphones, and less time on desktops and laptops.
Recent data from Forrester Research, Digital Insight and Bain & Company point to this mobile revolution:
- Approximately 90 percent of adults own a mobile device, of which smartphones are rapidly approaching half of all mobile devices in the marketplace.
- Approximately 96 percent of U.S. households have at least one wireless subscription.
- Roughly over 1/3 of online bankers are actively using their mobile device to engage with their financial institution, and mobile bankers are accessing their financial information 59 percent more often than non-mobile online bankers.
- Roughly three-quarters of branch interactions are routine (deposits, withdrawals and account balance inquiries), driving up costs and diverting resources from more important interactions.
The new online and mobile lifestyle requires digital banking as a new way of delivering a connected lifestyle. Customers would like to bank anytime, anywhere and on any device. Giving your customers the ability to deposit checks anytime and anywhere using a mobile banking app is the next revolution in that connected state.
I recently had the opportunity to analyze the behavior of customers who utilized mobile remote deposit, which was offered by a financial institution who uses Digital Insight for their online and mobile banking platforms. The analysis solely focused on customers who had an open checking account and made at least one deposit into the financial institution in each month of the analyzed time period.
Although the financial institution was less than six months into the product lifecycle, the results were extremely encouraging:
- Does mobile remote deposit cause customers to frequent the branch/ATM less for their deposit needs?
Digital Insight research indicates the answer is YES. Mobile remote deposit is changing consumer behavior and transferring more of those routine, costly “human” touch points to a less costly channel. Customers which ultimately used mobile remote deposit were using the branch for 29 percent of their deposits prior to using mobile remote deposit. Once the consumer starting using the service, their deposit behavior at the branch decreased to 19 percent – mobile remote deposit diverted 10 percent of all deposits away from the branch. Customers who never used mobile remote deposit did not experience a shift in their branch behavior. Usage of the ATM for deposits also declined for mobile remote deposit customers – 9.2 percent in the “before” period vs. 6.5 percent in the “after” period.
With the cost of gasoline over $3.50/gallon in most places, from the consumer perspective, think how much it costs (including time inefficiency) to drive to your local branch and make a deposit. Mobile remote deposit saves consumers money and is a more efficient alternative that savvy customers will demand.
What will this shift in behavior – from in-branch to mobile remote deposit – mean for the brick and mortar business model? In the short-term, it doesn’t appear financial institutions are in a hurry to reduce customer service headcount or slow the pace of new branch openings. The digital banking channel has created a more efficient operation; however, should not be viewed as an alternative channel. Rather, digital banking is moving towards more of an extension of the branch and with the reduction of “routine” transactions, in-branch representatives can invest more of their time cross-selling products rather than depositing a check.
- Does mobile remote deposit cause customers to increase their deposit activity?
Study results from Digital Insight indicate the answer is YES. Customers who used mobile remote deposit increased their monthly number of deposits by two percent, while those customers who didn’t use the service actually experienced a decline in their number of monthly deposits by three percent. Did the customer using mobile remote deposit magically begin receiving more checks once they started using the service? Likely not, but rather, instead of depositing a check into another financial institution, (perhaps for a savings or retirement account) they now deposited these funds into the financial institution which offered mobile remote deposit, which means the financial institution has further positioned themselves as the customers’ preferred financial institution.
- Does mobile remote deposit lead to higher consumer acquisition and/or lower consumer attrition?
To be determined. When I measured the results of mobile remote deposit, the financial institution was less than six months into the product offering with its customers The hypothesis is that mobile remote deposit will strengthen the consumer relationship and thus extend the consumer lifecycle. Additionally, now that the financial institution is offering this value-added service, the belief is that this product will attract new customers to the financial institution and win business from the competition. This could be especially true for the Gen Y and Gen X segments. The comment “attracting a younger demographic” is posed as a strategic initiative in my conversations with financial institutions. Over 75 percent of mobile bankers are Gen X and Gen Y, so these demographics will be the most likely to utilize mobile remote deposit.
The customers most likely to adopt the mobile remote deposit feature are cost‐effective bankers. They monitor their finances through the Web or their mobile phone at a higher propensity than all other customers, which lowers operational costs for the financial institution. In short, customers who desire mobile remote deposit utilize technology that is beneficial for the financial institution and the consumer.
About Jason Weinick: Jason is a Senior Analyst with Digital Insight and leads the initiative on client profitability analyses, providing banks and credit unions a valuable in-depth look into the value of the online channel. Jason’s background includes 15 years experience within the financial services sector, focusing on consumer behavior, risk modeling, reporting, and financial analysis. Jason holds a Bachelor of Science degree in Finance from Clemson University.
Sources: Forrester Research, May 2011; Digital Insight Profitability Study, April 2012; Bain & Company Customer Loyalty in Retail Banking Americas, 2011