How Mobile Check Capture Is Taking a Toll on Banks’ Branch Networks

Mobile card acceptance with smart phones gets all the headlines in the payments business, but consumers and small businesses are increasingly using handsets to deposit checks, too, and that has some executives warning that banks may soon have to rethink what to do with their branch networks.

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The primary reason consumers and small-business owners visit banks is to cash or deposit checks, but mobile capture removes that purpose, says Gary Brand, director of source capture optimization at Fiserv Inc., a Brookfield, Wis.-based vendor of processing technology for financial institutions. “Something’s really happened, all of a sudden [banks are] providing a mobile platform, and now checks are really drying up, foot traffic is starting to dry up,” he says.

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With mobile capture, check recipients use their smart phone to snap an image of the check and send the image to their bank for deposit. The image is then cleared and settled via ordinary image-exchange networks. The method may not be convenient for large numbers of checks, but for landscapers, plumbers, and other small businesses, it means they can make their deposits sooner and they’ll save a trip to the bank. Fiserv in September launched a mobile-acceptance application called SpotPay that allows card and check processing on Android or iOS devices.

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On the consumer side, there are an estimated 20 million users of mobile check capture, according to researcher Celent LLC., up from 10.9 million a year ago and 2.2 million in 2011. Some of these users are probably small-business owners, says Bob Meara, a Celent senior analyst who follows the business. “Most banks don’t make a distinction, they enable remote deposit capture for both,” he notes.

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Some 347 banks and credit unions had gone live with a mobile check-deposit service by last July, the last time Celent updated its figures, up from 137 in July 2011. But there were another 197 financial institutions in the so-called implementation queue getting ready to offer the service, up from 133 a year earlier.

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Fiserv’s Brand argues mobile capture is winning popularity across most demographic groups, despite a widespread perception that mobile services are used mostly by the young. “When my mother, who’s 80 years old, starts using a smart phone to capture checks, it’s game over,” he says. “Who would have thought it would take off across all these demographics as it did?”

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The impact on branch visits may be significant, and felt sooner than most banks had thought, Brand argues. Forty-five percent of bank executives expect traffic to erode 10% to 25% over five years, according to a Celent survey conducted last June. Another 45% look for visits to fall anywhere from 25% to 60%. “It’s not a cliff, but it’s pretty dramatic if you’re counting on that traffic for sales volume,” says Meara.

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Business proprietors will have a bigger impact than consumers simply because they account for more checks, Meara says. Even among very small businesses—those with $100,000 or less in annual revenue—some 52% go to the bank at least once a week, according to a Celent small-business survey from last July. “It takes a lot of consumers to add up to a meaningful result [in check volume],” notes Meara, so the consumer impact will show up later than that of small business.

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The increasing usage of smart-phone capture also complicates banks’ decisions on what equipment to buy. Some banks, for example, may pass on buying image-enabled ATMs if they see a rising tide of mobile capture. But Meara counsels that banks will need the machines to serve customers who are not mobile users. “I can see the sentiment of ‘save your money on image-enabled ATMs,’” he says. “But about half of consumers want nothing to do with mobile. It’s a divided mass market, so you’ve got to do both, and do both well.”

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What will banks do with all those branches? Brand says they can still attract crowds with the right mix of services, some of them having nothing to do with banking. Some branches, he says, have already become social centers where people meet, watch TV, and sip coffee while waiting to talk to bank employee about a loan.

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The implication of empty branches could be dire for selling bank products , warns Meara. “What happens when people hardly ever go into a branch and you deal with them digitally?” he asks. “How are you going to talk to them, learn about them? You’re in a heap of trouble.”