Slower Distributed Capture Growth?

By Mark Brousseau

Panelists at TAWPI’s Capture Conference admitted that they were surprised by the slowdown in growth of distributed capture solutions reported by TAWPI’s 2009 Document Management Study.

“When we looked at the report, we thought it was a very interesting statistic,” said Andrew Pery, chief marketing officer at Kofax, said during the panel discussion this morning in Ft. Lauderdale. “Based on our own experiences in the market, both distributed capture and remote capture are proliferating and there is increased adoption for both because of the benefits they provide.”

“The study shows that global and Fortune 500 companies are the primary users of distributed capture solutions with smaller firms using it in a more limited basis,” said Dana Showers of Capture Sage.

KeyMark CEO Jim Wanner told attendees that the recession has undoubtedly played a role in distributed capture “not taking off.” But Wanner said there is another issue within organizations that may be inhibiting growth: “There is a huge disconnect between the individuals responsible for scanning and the individuals making decisions on MFP devices. These individuals frequently don’t communicate effectively on how to solve the challenge of capture within the organization.’

The results of the TAWPI aside, the panelists saw growth ahead for distributed and remote capture.

“Distributed capture will continue to grow,” predicted Ken Kriz, manager of strategic alliances for AnyDoc Software. “But it can’t grow at its previous pace because it cannot overtake centralized scanning. Some organizations will utilize distributed capture, and some of them will not.”

“The use of Citrix has really taken off, which will help distributed processing,” Showers added.

Pery noted that despite the popularity of ATM banking, 63 percent of respondents to a recent study said they prefer to interact with a bank branch employee – illustrating that the ability to deploy remote capture solutions and multi-function devices are becoming more strategic. “We’re also seeing expanded use of capture at the fringes of the enterprise, such as with field agents,” he said.

Going forward, the panelists saw mobile phones as another remote input stream for images.

“High-production users won’t use cell phones to scan documents in the back office, but they might be one of the inputs into a high-production system,” Kriz told conference attendees.

What do you think? Post your comments below.

ET Phone Home

Posted by Mark Brousseau

Vijay Balakrishnan, president of StratEx LLC (770-598-5747, www.stratexllc.blogspot.com) passes along an article he wrote on the recent announcement by USAA that it will allow its customers to make deposits by iPhone:

Mobile phone cameras have captured images of everything from election protests in Iran to the recent tragic collision of a helicopter and a small plane over the Hudson River. So, what could one possibly add to the list of things that would intrigue mobile shutterbugs? With apologies to Mr.McGuire in the movie The Graduate, "I have just one word for you. Just one word.....checks."

The recent announcement from USAA, allowing its customers to make deposits by sending images of checks taken with their Apple iPhones, brings together technologies from the 19th and 21st centuries. Until the advent of Check 21, the movement of deposited funds depended on the physical transport of paper. An extensive retail branch network was developed to act as collection points for deposited paper. USAA, which serves 7.2 million active and retired members of the U.S. military and their families from one branch in San Antonio, has consistently used technology to turn conventional wisdom on its head. Three years ago, it announced its Deposit @Home service that allows customers to make deposits by sending images of checks scanned at home. Despite early scepticism from many, USAA claims 150,000 users. The addition of mobile smart phones takes the remote capture notion even further.

In addition to this announcement, mobile deposit technology provider Mitek Corporation has announced relationships with Fiserv, RDM, NCR, and J&B Software to take the capability to their customers. As these formidable players get past their pilots and launch offerings, we will likely see more financial institutions make mobile deposit services available.

What about fraud, you say? Doesn't Check 21 require account and transit information to be read magnetically to ensure security? While I admit that the prospect of sensitive check images flying through the air can be unnerving, and there are issues of authentication, privacy and data integrity that need to considered (another post, another day), the fact is that there is no regulation that requires that the magnetic ink character recognition (MICR) information be read magnetically. In fact, Check 21 is silent on the subject. Thus absent regulation, it falls to the individual financial institution's tolerance for risk, versus the obvious convenience of the service.

There are two factors that can mitigate risk to some extent: the old dictum of knowing your customer (KYC), and the option to delay funds availability until the check has cleared. I believe we will see the adoption of mobile deposit capture in defined communities such as the USAA customer franchise, where the financial institution has a very good idea of risk exposure. Credit unions with well defined memberships are more likely to offer this service than banks (and like USAA, most credit unions are also not extensively branched allowing them to make virtue out of necessity). We will likely see the service offered to the "safest" customers first, based on their deposit history, followed by a gradual expansion using funds availability agreements as a tool to calibrate exposure.

The banking community at large has a different challenge. Deposit acceptance is arguably the raison d'etre for large retail branch networks. Remote capture in general, and mobile deposit in particular, poses an interesting channel conflict paradox (see BAI Insights for a summary of a presentation I did with Bob Meara from Celent on the RDC/Branch paradox). Thus, my take is that banks (particularly the larger ones) will perceive mobile deposit as a bridge over troubled waters and be reluctant to put their branch network at risk.

While I don't see the airways saturated with check images from mass deployment, I believe mobile deposit will do well through niche (not necessarily small) adoption. Technology providers, transaction processors, and financial institutions all have different but related niche marketing challenges ahead. Astute target market selection will likely govern success. The alignment of factors like service and product features, pricing (ex: who pays for the data plan for zapping all those images, and what's the payback?), as well as path-to-market partnerships, are imperatives to be carefully considered.

What do you think? Post your comment below.

Rethinking Consumer Remote Deposit Capture

Posted by Mark Brousseau

An interesting article by Diebold from the Self Service and Kiosk Association Web site:

Is consumer remote deposit capture right for every financial institution?

by Robert MacMahon
26 May 2009

Since the inception of Check 21 in October 2004, adoption of remote deposit capture has been steady among financial institutions that cater to business customers.

According to Celent, 75 percent of all U.S. FIs are expected to be remote capture-enabled by the end of 2008. With the rapid and widespread embrace of commercial RDC, many financial institutions are interested in exploring the new frontier of this capability: consumer remote deposit capture.

Technologies are now available that enable FIs to securely process checks sent via ordinary scanners, thus opening the doors to RDC for consumers and small business owners. On this front, Celent says that 7 percent of FIs report already having either a complete solution or a pilot program up and running; meanwhile, 15 percent report plans for a consumer RDC solution and 22 percent say they would consider such a solution.

For many FIs contemplating this offering, questions still abound. To determine whether a consumer RDC program is right for your institution, and to ensure a smooth execution, a few key steps should be followed.

Identify your customer base

To assess the potential for success with a consumer RDC program, it is important to first evaluate your existing customer base, as well as potential new customers. For customers acclimated to off-hour banking solutions such as online banking, or for those who live far from a branch, consumer RDC could be a welcome offering. Evaluating your customers can also help you analyze overall risk and define the ideal customer to target in your marketing efforts.

Qualify your customer base

Diligent "know your customer" policies are extremely important in consumer RDC programs. While advanced safeguards are incorporated in the software developed for these programs, mitigating risk lies largely in the hands of the FI. Take inventory of the risk management controls that are currently in place at your institution, and consider a risk strategy designed specifically for a consumer RDC program. First and foremost, you'll need to set criteria to determine a customer's eligibility for this offering. For example, prerequisites for access to a consumer RDC application could include good credit and a long and positive history with your institution.

Take inventory of your security and monitoring capabilities

As previously mentioned, consumer RDC software solutions should include security features that allow your FI to control the flow of remote deposits in real time and customize the security criteria. This ensures that any deposits submitted for processing that do not meet the set standards are flagged and held until cleared by an authorized employee.

The crucial element then becomes identifying designated and qualified staff to monitor and control the software. Smooth deployment depends on your employees' understanding of and adherence to all protocol related to your RDC program.

Deploy your consumer RDC program

The final element of a successful consumer RDC program is smooth integration of the application into your FI's existing system. The key to a seamless inclusion of a consumer RDC program is that the software is easily installed and integrated into other back-end processes. Furthermore, the application should be easy and straightforward for the end user to encourage adoption among your target customers.

As the most rapidly adopted technology in the history of the financial services industry, the potential is there for remote deposit capture to become a successful consumer application. As with any new technology, before considering a consumer RDC program for your institution, several factors must be taken into consideration. With a firm understanding of your institution's customer base, risk controls, employees and, last but certainly not least, the technologies and processes through which you plan to execute the program, a successful consumer RDC program launch is within reach.

Robert MacMahon is senior business development manager of payments and imaging solutions for Diebold ImageWay, the deposit automation and imaging division of Diebold Inc.

RDC and Risk Management

By Mark Brousseau

On January 14, 2009, the FFIEC (Federal Financial Institution Examination Council) published long-awaited guidance on “Risk Management of Remote Deposit Capture.”

This guidance defines Remote Deposit Capture (RDC) as a “deposit transaction delivery system” rather than simply as a new service. It talks about RDC in terms of information received by a financial institution from checks sent electonically from remotely located businesses and individuals, as well as the financial institution’s branches, automated teller machines (ATMs), and domestic and foreign correspondents. However, it focuses primarily on RDC deployed at a customer location.

RDC introduces some new risks and increases some existing risks in processing deposits, says Kathy Levin, AAP, managing director, Payments Information Circle (404-478-3491, kathy.levin@paymentsinformation.com). Some financial institutions have begun offering the service without fully understanding the risks involved in RDC, she notes.

“The guidance addresses expectations for identifying, assessing and mitigating risk and discusses roles and responsibilities in implementing and operating RDC in a financial institution,” Levin told me. “It makes it clear that, as with any new payment delivery system offered, there should be no implementation of these services without management oversight, compliance/internal audit involvement and board approval.”

Levin adds that the guidance addresses the necessary elements of an RDC risk management program and provides strategic, credit/underwriting, vendor management, legal and compliance, fraud management, and operational and implementation direction for financial institutions. It also emphasizes the importance of adequate risk management at the remote locations, she says.

“Many financial institutions implemented RDC quickly and experienced rapid adoption of the service,” Levin says. “Some may need to go back and revise their policies and procedures to ensure they are in line with the new guidance.”

In addition to the suggestions contained within the guidance itself, Levin says financial institutions will need to utilize information contained in the FFIEC Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual, Interagency Guidance on Authentication in an Internet Banking Environment, Interagency Guidelines Establishing Information Security Standards, and sections of the FFIEC IT Examination Handbook, including the Information Security Booklet, the Management Booklet, the Outsourcing Technology Services Booklet, the Business Continuity Planning Booklet, and the Operations Booklet, to ensure compliance in specific areas.

For a copy of the new FFIEC guidance, visit http://www.ffiec.gov/pdf/pr011409_rdc_guidance.pdf.

Deposits Will Be Critical in 2009

By Mark Brousseau

There’s little question that we’ll see continued economic change and upheaval in 2009. But Michael Pratt, chief marketing officer, Panini North America, says remote deposit capture (RDC) solutions create an opportunity for financial institutions (FIs) to defend and even acquire the ever-important Demand Deposit Account (DDA) line of business.

With tightened credit markets and higher regulatory and market scrutiny, domestic deposits have become even more critical for FIs. McKinsey estimates that payments represented $235B in FI revenue in 2006, or 40-50 percent of an average bank’s revenue, Pratt notes. Revenue related to DDA is typically 45 percent of this base, or 18-22 percent of an average bank’s total revenue -- highlighting the significance of payments and deposits to a bank.

Economic conditions have increasingly made deposits the “benchmark” by which FI health is perceived in the market, Pratt says, and is the driver of their ability to continue to facilitate financial transactions. “We have already seen major acquisitions based primarily on access to domestic deposits, so the ability of FIs to capture deposits will be very instrumental to their success,” he explains.

“Deposit retention and acquisitions programs are central to the well being of DDA related income to all financial institutions, resulting in a renewed prioritization for remote deposit capture,” Pratt says. “Distributed capture, after all, is at its core a strategic means of acquiring deposits while lowering operational & processing costs.”

Banks that take maximum advantage of this opportunity to gain new deposits and solidify customer relationships via RDC stand to gain the high ground in the war for deposits, he concludes.

What do you think? Post your comments below.

Gaining Control Over Stranded Payments

Significant changes in the payments landscape and the intense growth of Remote Deposit Capture (RDC) over the last three years has triggered the necessary expansion of RDC from capturing check deposits only to providing the capability of capturing retail and wholesale remittance payments, as well.

That’s according to Sam Golbach, senior product manager for WAUSAU Financial Systems.

These changes have created new payment processing workflows and allow financial institutions and remittance processors (lockbox providers, corporate billers) to offer new, creative solutions to customers and in-house operations for capturing “stranded payments,” Golbach told me.

Stranded payments can be defined as payments received at remote locations via walk-in, over-the-counter, mail or other delivery methods. Goldbach said the steps to process, post and deposit are different than the central remittance processing site or sites. “Today, remittance solutions can be tailored based on customer needs or an organization’s internal processes to address the challenges that stranded payments pose,” he said.

To capture remote payments, remittance processors can combine remote and central payments into a single workflow with aggregated reporting, A/R file updates and archives, which creates a compelling business case when one considers the revenue-generating benefits realized through remote capture such as lower processing costs, improved workflow efficiency and funds availability and reduced bank accounts and sweeps, Goldbach explained.

He said early adopters are enjoying an innovative offering that is quickly gaining momentum and driving demand for other remittance processors to take notice and invest in remote capture technology. While vertical growth has been most evident in the healthcare segment, this is just the tip of the iceberg. Interest from brokerage, insurance and property management firms is quickly taking shape, Goldbach noted.

“For lockbox providers, this is a solution that continues to open doors to new markets, enhancing existing customer relationships, driving additional fee revenue, expanding market share and increasing deposits to succeed in today’s marketplace,” he concluded.

Is your lockbox offering corporate remittance capture?

Post your comment below.

Remote Remittance Capture Grows

By Mark Brousseau

While some lockbox providers have been disappointed by what they see as sluggish demand for their remote remittance capture solutions, Chris Rohner (chris.rohner@fnis.com), national remittance sales at Jacksonville, Florida-based Fidelity National Information Services (FIS), says the demand and volume has met her company’s expectations. FIS has about 20 financial institutions doing some form of remote remittance capture, Rohner told me.

The thing to keep in mind, Rohner notes, is that distributed capture isn’t for every lockbox client. “It works well when the customer has remote locations with walk-in payments, and they don’t want to be bothered completing the transaction,” Rohner said. “A good example of this is tax processing, where a municipality might have a lockbox, but also accepts walk in payments. At the end of the day, they want to receive one file and one set of reports. This is ideal for distributed capture.” In addition to municipalities, Rohner said FIS is seeing strong demand for its distributed capture solution from utilities and property management firms.

And she expects interest to pick up as FIS rolls out flatbed scanning capabilities for supplemental remittance documents. Today, the company only captures checks and coupons, with MICR and OCR read technology. It also offers a remote deposit capture solution to automate check deposits to a bank, and a consumer capture solution, as well. “We do a lot of due diligence before recommending a distributed capture solution,” Rohner told me.

How would you describe demand for remote remittance capture?

Post your comment below.

Why The Fuss Over Remote Capture?

By Mark Brousseau

Many people believe that the future of electronic payment processing includes a growing trend toward including accounts receivable, check and deposit capture at the point of presentment. So what are the benefits of this strategy? And what about its challenges?

“The strategy of moving image capture to the point of presentment provides numerous advantages,” Wally Vogel (wally_vogel@creditron.com), president of Creditron, Inc., told me. “Obviously, there is the reduction of payment document handling and forwarding, and the associated lag time. This improves cash control and offers faster funds availability.”

“Beyond that, image capture at the point of presentment allows for greater control and audit capabilities,” Vogel added. “As soon as the document is scanned, it is captured and logged, and can be tracked through various processes for depositing, accounts receivable updates, and handling change of address requests and customer service inquiries, among other functions.”

With the proper systems in place, Vogel added, document images can be viewed from any authorized inquiry station on the network for customer purposes, within minutes of receiving the document. This means that data completion from image can be completed in a remote office or in a centralized location, providing greater flexibility while maintaining strict control and a complete audit trail for each transaction, wherever it is processed.

“One of the significant challenges of image capture at the point of presentment is the need to standardize rules, processes and practices across remote offices. Otherwise, users may not get the full advantage of remote capture,” Vogel said. “This may require a thorough business analysis and a willingness to unify business processes.”

What do you think? E-mail me at m_brousseau@msn.com.

Changing Scanner Business Case

By Mark Brousseau

There's no question that the business case for distributed scanners is changing, says Don McMahan, vice president of sales and regional general manager, US&C, Document Imaging, Graphic Communications Group, for Eastman Kodak Company.

"Since introduction, distributed scanners have provided a way for all organizations to take advantage of dedicated document capture solutions," McMahan told me. "These technologies were previously only available to organizations whose budgets could support both costly equipment as well as trained personnel to operate it."

"That said, the benefits of distributed scanners are also being realized within the broader market. Even larger firms that have centralized scanning operations have recognized the additional benefits in implementing distributed capture," McMahan explained. "Why should having a budget for production scanning capabilities and skilled personnel be detrimental to continued growth and success? Combining an existing deep bench with distributed scanning at the right points within an organization can enhance efficiencies many times."

McMahan said that equipping field offices with distributed scanners enables employees at these locations to quickly share documents they receive with the main facility for processing. These technologies immediately alleviate the cost and hassle with overnight mail, including delivery delays, or losing documents altogether.

"Furthermore, capturing information at the point of acceptance enables companies to quickly get it into their document management systems. This promises faster access to information, decision making, and by extension, increased customer satisfaction ultimately making the business more efficient and profitable," he said. "Technical innovations equate to enhanced capabilities, ease of use, and improved system connectivity for distributed scanning. We’re observing how distributed capture is not only changing how document capture better serves current end users, but also the landscape of who the average end users will be in the future."

McMahan said Kodak expects to see more pre-packaged solutions for a variety of vertical industries. The continued advancements in imaging hardware and software will move distributed capture beyond the primary benefits of document scanning towards highly specialized applications for information management solutions, he added. Many of these solutions will be equally at home in both distributed and centralized scanning operations.

Expect Branch Capture Renaissance

By Mark Brousseau

Jeff Vetterick (jvetterick@myriadsystems.com), executive vice president of marketing at Myriad Systems, Inc., thinks the ‘next big thing’ in distributed capture may be an old topic: branch capture. “Although branch capture preceded merchant capture by several years, it never took off like merchant capture has,” Vetterick told me this week. “Some banks just couldn’t see the incremental operations improvements that branch capture offers. But what merchant capture has done is show banks how powerful distributed capture can be.”

Also working in branch capture’s favor is that many banks now have imaging and distributed capture deployments – and the associated software and hardware infrastructure – on which to piggyback. “I see a renaissance or second, much larger wave of branch capture building across the market,” Vetterick said, adding that Myriad Systems has been selling branch capture solutions to community banks “left and right. We’ve just closed a bunch of deals.” He expects mid-tier and large banks to start jumping on this trend as well, “big time. Banks that have bought into merchant capture are now turning their attention to branch capture.”

Vetterick said the debate about front or back counter branch capture still exists, with back counter capture remaining the least obtrusive to bank operations and workflow. Unless it is integrated with the bank’s branch automation system, front counter capture is “kluge and clunky” and creates problems associated with not being able to talk to the host, he said.

What has been resolved, at least to Vetterick, is that ASP will continue to see tremendous growth in the branch capture space; more banks view ASP as a more appealing option than spending big bucks on an in-house system or giving up control and outsourcing the work.

What do you think? E-mail me at m_brousseau@msn.com.