[I am in Las Vegas for the TAWPI Payments in Transition conference – these are my notes from one of the sessions. An index of all of the sessions and links to the rest of my notes is here. – EMc]
Distributed Capture: Trends, Opportunities & Challenges
David Peterson, Executive VP, Goldleaf Financial Solutions
[program blurb] As the unit costs of processing paper items continues to rise, it is more important than ever for financial institutions to consider deposit automation as an essential component of their technology strategies. This session will offer a high level look at the evolution of distributed capture, its current state and projected growth both nationally and globally. It will explore various operational models, and discuss the importance of having a complete enterprise payments plan prior to selecting and implementing a solution. Participants will gain an understanding of revenue implications for branch deposit automation solutions, as well as the market and revenue potential for business and consumer deposit automation technologies.
[presentation]
My notes/observations:
This product is near and dear to my heart. I got my start in payments developing prototype for remote capture of large over the counter merchant deposits at remote branches for Wells Fargo (nearly ten years ago!)
Peterson is a dynamic speaker. And he’s funny too: he referred to Starbucks as “fourbucks” which I found amusing. Most of the audience didn’t catch it but there were a few chuckles.
Merchant Remote Deposit Capture is the most successful product introduction of all time. Fastest adoption ever – most banks are already offering (all large, most small). If your bank hasn’t offered it to you yet, you may want to reconsider your banking partner. Companies that don’t go online use it. Adoption of merchant image capture has surpassed online banking adoption. Banks will invest $10B over the next decade in Check 21 technology (3.5 million seats by 2010, per Celent, up from 260,000 in 2007).
Item Processing vs. Deposit Automation. Traditionally FIs concentrated on efficient item processing (centralized, large scale processing) vs. decentralized effort to capture, validate, ensure image quality, balance, and management of transactions in real time at all points of physical presentment (customer location, teller line, )
Teller line. 5 million seats by 2012. Retail branch capture is projected to growth 26% from 06 to 10. More time to interact with customer rather than processing transaction – improve cross selling.
Instead of gigantic large processors at central IP location, spread smaller scanners to various end points. Level load activity throughout the day. Process efficiency, mitigate risk, customer retention.
Battleground for customer desktop. If you get your scanner on the customer’s desk, you are more likely to maintain that customer location. Hard for your competitor to dislodge you and your scanner with another scanner. Especially if you deliver tight integration with customers AR (Mas90, QuickBooks, etc.).
Shift to web ASP approach. Easy to deploy. Rapid adoption. 25% of banks will have multiple solutions for different business, different distribution models (3rd party integrators); small/medium biz will be main stream – get in now.
Person who makes the deposit is often most resistant (take away my opportunity to get out of the office and take care of other errands too???)
Businesses of all sizes immediately grasp the benefits: Small biz value fewer trips to branch, safety for employees (no more nightdrop), time savings, less desk float. Larger biz value float gain, oppty to consolidate bank relationships and eliminate sweep accounts, and the cost reductions.
One size does not fit all – 1) big box (payments already consolidated at lockbox where they are converted to image and converted to ACH via ARC). Many of these companies have a small number of checks that arrive at the corporate office that are targets for small capture ASP model. 2) Big in House Capture business – automate opening/capture/posting of incoming check payments, but cannot create appropriate ACH / Check 21 image file or just need entry point to the clearing process. 3) Medium manual. Not big enough for lockbox. Need high speed capture (rather than small scanner). Concentration of items all in one place (vs. spread over a number of locations with relatively few checks each). 4) 98% of US businesses fall into the final category: small businesses with few to few dozen items per day. FIs aren’t targeting. Law firms, insurance companies, rancher, storage service. Average $3500 check – so value is in depositing in a timely manner.
Evolution of products: smart scan (lease const routing to determine ACH or Check 21), cash capture safe, in the future, ASP will dominate, consumer capture will develop as a niche product – TWAIN compliant scanner, cell phone picture, – certain financial institutions (high net worth individuals e.g. Legacy Bank in Phoenix, USAA with no branches)
Branches with fewer teller stations; remaining tellers will provide more full service (e.g account opening). Add more room for sales people: investments, loans, etc.
Comment from audience: High servicing cost for low-end market (why banks aren’t getting penetration at smaller end of the market). Cost of successful deployment is higher than taking deposit in traditional mode. Need idiot proof solution (plug and play). Whiners want to go to Starbucks when they leave the office to go to the bank,
Comment from audience: Converting checks into images; check volume is declining rapidly; won’t RDC decline too? There are still 30 billion checks out there. Becomes a question of the most efficient, convenient means of processing the minority of check transactions (very few physical deposit of checks in future, RDC will be come standard, mainstream – for both biz and consumers – solution as checks become minority payment method).
