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2015 Outlook of the RDC Industry

2015 Will Bring Broader Adoption, Plus More Product Innovation & Risk Mitigation Strategies

Mitek President and CEO James DeBello is bullish on mobile deposit, and he’s expecting a huge surge in business adoption. “By the end of 2015 more than 50% of all financial institutions will offer mobile deposit services tailored to the needs of business customers,” he predicted. Companies with mobile workforces, will begin increasing adoption of solutions that “enable these workers to use smartphones and tablets to quickly capture payment and business documents at the point of service,” DeBello said.

It’s not just financial institutions and solutions providers that are poised to benefit from the ongoing evolution of RDC. DeBello also predicted consumers will reap huge time savings from mobile RDC and other mobile banking apps. “We have found that the average consumer will deposit 18 checks annually, and looking at the average time it takes to travel to an ATM versus making a mobile deposit, mobile banking will save users in North America approximately 282 million hours in 2015,” he said.

DeBello is not a lone optimist. In fact, everyone contacted for this report expressed similar degrees of optimism for ongoing RDC adoption in 2015.

Paul Vicary, National Sales Manager at device manufacturer Burroughs, agrees 2015 will be a big year for RDC. “We see significant growth opportunities,” he said. One measure of this will be a larger, more aggressive Burroughs sales presence, following several years of “trailing in the RDC space.” Burroughs has been busy playing catch up with its competitors and getting buy in from corporate end users, Vicary noted. “We’ve built what we think is a strong offering,” he said.

“With mobile RDC booming, but mainly targeting consumers, we see an opportunity for so-called commercial mobile capture, which we (and possibly others) are ready to seize,” added Francesco Grasso, Corporate Marketing Manager at terminal manufacturer Panini, in Tornio, Italy.

Past efforts to sell small and mid-sized businesses on RDC failed in part because of hardware costs and the complexity of eligibility requirements and onboarding. But we’re seeing turnaround, Grasso said, adding the market will host more RDC platforms that are operating system agnostic and can support both desktop and mobile capture.

Keeping Pace with Millennials

“We still see a lot of growth,” said Jeff Mack, President of Cachet Financial Solutions. Mack is especially bullish on mobile deposit adoption among Millennials, a demographic known to be especially attracted to prepaid cards that offer mobile access. “They manage their lives around technology,” Mack noted.

Banking futurist David Peterson said financial institutions that ignore Millennials do so at their peril. With increased competition from nonbanks, like American Express which has a successful prepaid card program (Bluebird) that features mobile deposit (albeit with 7-day check holds), banks will be forced to respond. “Any bank can do better than that,” said Peterson of the Bluebird check holds.

Mack sees more banks and credit unions going after Millennials. He expects a successful prepaid program targeting Millennials that was launched last year by Navy Federal Credit Union (using Cachet’s mobile deposit app) to spur more credit unions and community banks to action. “With mobile, prepaid becomes a much more interesting opportunity for financial institutions” to pursue Millennials and even the unbanked, he said.

Customers Bancorp, a Pennsylvania community bank holding company, is one FI that’s pursuing the opportunity. It just launched BankMobile, a mobile-only fee-free bank designed by and for Millennials with checking accounts. BankMobile incorporates Mitek’s Photo Account Opening app, DeBello said.

Mobile applications like these are not just about convenience, or improving workflows. They are not just about appearing tech savvy, either. Leveraging smart phone photo apps is smart banking. Being able to capture images of drivers licenses, for example, can help support FIs know-your-customer programs, explained Daniel Steere, Director of Product Management for Mobile Image Capture, Risk Management Solutions, at Fiserv. “The technology is on the cusp of being able to do things like that,” he said.

21st Century Growth Opportunities

User experience will be a key driver in adopting new financial apps that leverage Millennials smartphones, Steere added. One result will be new capture solutions that are “more video centric,” he explained. “Video capture offers a better user experience,” said Steere. “It also supports better recognition rates.”

As smartphone adoption continues to proliferate in 2015, “demand for a more personalized experience and innovative new products and services that leverage smart device capabilities and cameras will reach an all-time high,” DeBello predicted.

Corporate adoption will continue, too, at a brisk pace. “We’ve been spending a lot of time with corporate customers,” Vicary said. “We expect them to aggressively push banks on our behalf.”

Concerns about data security also will continue to have implications for product development and service offerings. This is not surprising, given that RDC is data rich.

“RDC was rooted in checks, but RDC increasingly has become more about the data that surrounds payments,” said John Leekley, Founder and CEO of One result going forward will be an increased focus on better integration with treasury management services, Leekley said.

Also expect more RDC activities on the international front this year. “We see some interesting opportunities emerging outside the U.S.,” said Grasso.

“Countries like Canada have been able to take the lessons learned over the past decade and run with them, and the result is a top-notch system that other countries can use as a template – and we expect many will as they introduce their own electronic clearing systems,” said Hempker.

Fraud & Other Risks Won’t Disappear

Fraud and other risks long associated with deposit products won’t disappear, and will continue to command the attention of FIs this year as regulators ratchet up oversight. One challenge for FIs will be in determining how best to strike a balance between good customer service and adequate fraud and risk controls.

“There are real fraud risks,” explained Steere. But there are also viable ways to address those risks, including deposit pricing. Several prepaid companies and a handful of banks have begun to price risks associated with consumer transactions: assessing a fee for immediate availability on mobile deposit, for example. “We believe this is a way to increase [customer] satisfaction and also to generate some fee revenue,” said Steere.

“We’re seeing interest in data encryption for data at rest,” said Harry Rose, Vice President at RDM Corp. In response, “RDM is implementing encryption technologies for data and images that are stored on our servers. This adds yet another layer of security to our infrastructure,” Rose said.

Other changes are also certain, although no one can predict which will have staying power. “We think the next few years will see a lot of companies [trying] to figure out what the new normal is, and asking themselves ‘Where does my technology and expertise fit into this new picture?’ whether that is imaging, security, self-serve kiosks or something else,” Hempker said.

The Bottom Line

In 2015 retail and business adoption of RDC solutions will flourish, driven largely by mobile apps. Corporate adoption will also benefit from improved integration with receivables operations.

“RDC and mobile RDC are the safest, most reliable payments products out there. We need to talk more about that,” said Peterson.