Mobile Check Capture Is Saving Banks Big Bucks, But How Big?

The increasing popularity of depositing checks via mobile devices could end up saving financial institutions offering the service a good deal of money, according to a recent study. But, while cost savings from mobile check capture are real, there are offsetting factors, says an expert not connected with the study.

A deposit in a bank branch costs the bank $4.25 on average, while the same deposit on a mobile device costs 10 cents, a study released by Javelin Strategy & Research reports. At that rate, if the bank can convert just one branch deposit to a mobile deposit per month, it can save $4.15 per deposit or $49.80 per year per customer.

The key, says Javelin author Mary Monahan, is to convert those customers who are considered so-called mobile bankers—those who regularly use mobile devices to check their accounts, pay bills, make person-to-person payments, and perform other banking functions. As it turns out, some 57% of these mobile bankers make at least one branch deposit per month on average, despite their proclivity for mobile, according to Javelin research. Converting one deposit per month from these customers to mobile capture can yield as much as $1.5 billion in total savings, the report says.

With a mobile-deposit app, customers can deposit a check by making an image of the front and back and sending the image to their bank. From there, the deposit is handled as if the item had been imaged at a branch or other location. Users are cautioned to destroy the original check.

Any number of factors could account for branch usage for deposits by people who otherwise rely on mobile phones or tablets to do their banking, Monahan tells Digital Transactions News. To begin with, not all financial institutions offer mobile deposits. Monahan says about 64% do.

Further, some users may be put off by restrictions banks put on the service to control risk. Some banks, for example, limit the size of deposits or the number of transactions. Some users may have tried the service but found it handicapped by glitches. And still others may not have heard of it yet. “They may not know about [the service], and that needs to be addressed,” says Monahan, who is executive vice president and director of research at Pleasanton, Calif.-based Javelin. “There is still more work to be done.”

But the actual savings may not be quite as dramatic as Javelin estimates, says Bob Meara, a senior analyst at Boston-based Celent LLC who follows remote capture. While he agrees a mobile deposit should cost a financial institution less than a branch deposit, estimating the actual savings is a complicated business, he says. In large part, he argues, this is because converting a branch transaction to a mobile device doesn’t make the branch and its operating costs disappear. “The teller window still has to be staffed, and the lights are still on,” he says. “Unless banks can take that cost out, it’s fixed. I’m not aware of a single bank that would attempt to merchandise a business case on this basis.”

For her part, Monahan explains in the report that “[t]he estimated potential savings figure was calculated using cost-of-transaction estimates collected through industry interviews with high-level executives.”

Moreover, says Meara, it’s hard to tell whether mobile deposit is taking transactions away from the branch or from new ATMs permitting envelope-free deposits. These are machines in which many banks have just made hefty investments but are less costly than branches. “Will [mobile remote deposit capture] cannibalize branch traffic or ATM traffic?” he asks. “Banks aren’t going to be in control of that outcome.”

At the same time, he argues 10 cents is too low for the cost of a deposit transaction on a mobile phone or tablet. Licensing the software, staff training, and support, along with compliance costs, would add up to more than a dime, he argues.

Also, the convenience of mobile capture could encourage higher overall cost because users might be induced to make multiple deposits with a mobile device in cases where they would have consolidated all checks for a single deposit at the branch. “There’s some of that going on, probably more of it among business users than consumers,” Meara notes. “Ten mobile [remote deposit capture] deposits doesn’t [always] translate to 10 branch deposits.”

Still, Meara agrees that mobile deposit has become extremely popular with consumers and businesses alike. In a June Celent survey asking active Internet users to rank “emerging” digital services by their value, two-thirds ranked mobile capture “highly valuable.” This was second only to “view all your finances in one place,” which scored 77%.