Mobile Capture’s Profile Rises As Smart Phone Adoption Climbs

Remote deposit capture by means of smart phones, a technology that seemed futuristic only a year ago, is rapidly taking root, but questions remain about smart-phone adoption, security, and the type of financial institution for which it makes sense. Two recent studies, one of which was released this week, document a surprising level of consumer interest in the technology, which allows persons to use software on a smart phone to snap photos of a check and then send the image to their bank for deposit. One in four consumers would like to use mobile remote capture, according to survey research released on Wednesday by Javelin Strategy & Research. The firm found that desirability rises even higher with those who receive alerts (53%), who do mobile banking (50%), and who have an iPhone (45%). This surprising response to a technology that only emerged within the last few years and has been available commercially from only one financial institution echoes the results of a study released earlier by another research firm. Mercatus Advisors found in a December survey, with results released in February, that 59% of those who use mobile banking would be likely to use mobile remote capture (Digital Transactions News, Feb. 17). Adoption of mobile remote capture is restricted for the time being by the fact that most applications rely on the smart phone, a type of handset used by only 18% of U.S. adults, according to Javelin. But that's up from 12% in 2008, and the researcher predicts the share will rise rapidly, reaching 24% this year and crossing 50% by 2014. Also, consumers are much more likely to use their handsets to take pictures than researchers thought. Javelin found 54% of consumers take photos with their phones, making it the third most used function after text messaging and voice calls. “We've got half of consumers taking pictures on their cell phones, it's amazing,” marvels James Van Dyke, president and founder of Javelin. Another uncertainty surrounding mobile remote capture, Javelin says, is how many?and which?financial institutions will offer it. So far, only USAA, a single-branch financial-services company in San Antonio, Texas, has rolled out a commercial mobile-capture service. Van Dyke argues the service makes the most sense for institutions like USAA that have few branches and a high ratio of deposits to branches. “My advice to a New York Mellon, a Citi, or a Navy Federal is, you should be rolling this out now,” he says. While most observers doubt that banks will be able generate fees from the service (though they point out that fees for small-business use might be possible), Van Dyke says it could generate cost savings that would flow to the bottom line. It also serves as a “mobile-payments enabler,” he says, easing banks into a new channel for electronic transactions. “If you want to be in the [mobile-payments] game, you have something that gives you here-and-now benefits,” he says. “You're going to have a leg up on your competition.” As an example of the competitive benefit of mobile capture, Van Dyke points out how, when asked why they switched banks, fully one third of respondents said they did so because they had moved to a new area?the most cited reason in the survey. But with mobile and any other form of remote capture, physical location is no longer a barrier to staying with a bank. “You're making the branch irrelevant,” Van Dyke observes. The potential for fraud also concerns many bankers and observers, Javelin says in its report. Heavy and continuing doses of consumer education will be necessary to get users to understand, for example, that they must destroy paper checks after processing them through their phones. Banks, too, will have to carefully roll out the service, offering it only to their most trusted customers, experts have warned. Javelin's report also advises daily limits on deposit amounts and on the time until the funds become accessible, as well as a so-called hot list of abusers that can be shared among banks.