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A recent American Banker article titled The Power of Mobile Remote Deposit Capture quotes a fellow industry analyst who states that:
“Mobile remote deposit capture (RDC) is one of the reasons people understand the value of mobile banking. Mobile RDC — in which people use the smartphone’s camera to take a picture of a check to commence a deposit — is becoming so popular, banks may actually be able to charge for the product while saving overhead costs at the same time.”
My take: I disagree.
According to research recently completed by Aite Group, using a generous definition of mobile banking adoption, about one in four US consumers are mobile bankers (a more conservative definition puts the adoption rate at 20%). Of these mobile bankers, about one in five used a smartphone to take a picture of a check in the past three months, one in ten used a feature phone to perform the task, and 7% used a tablet to do it.
Based on this rate of usage, it’s hard for me to agree the RDC is a major reason why people “understand the value of mobile banking.” More than half of all mobile bankers are Gen Yers — a generation that is already a major user of everything mobile-related. These folks don’t need RDC to convince them of the value of mobile banking.
Furthermore, the assertion that banks “may actually be able to charge for the product” should be reconsidered for (at least) four reasons:
1. Consumers always overestimate their willingness to pay. I can’t even begin to count the number of surveys I’ve seen — and done — where consumers have expressed a willingness to pay for something, but when the rubber meets the road, those intentions never materialize.
2. The demographics of RDC users. About seven in 10 RDC users are Gen Yers — also known as the generation least able to pay for more banking-related fees. In fact, an analysis I did of consumers who switched banks last year found that the addition of account-related fees was the number one reason why people switched.
3. The potential political backlash. When a number of banks tried to assess a fee for debit card usage (used by a very high percentage of Gen Yers in particular), the political reaction was fierce. One politician even went public saying that customers of one of those banks should pull their money out of the bank.
4. The cost savings opportunity. The AB article says that “RDC check deposits cost as little as four cents per check, [while] it costs between 75 cents to more than three dollars to process check deposits via traditional means.” Let’s do a little math here, shall we? At the conservative end of those estimates, the cost savings of an RDC-deposited check is $0.74/check. It seems very unlikely to me that, even if consumers were willing to pay for RDC, they’d pay $0.75 per check. What does seem likely to me is that if a bank charges a fee for RDC, the percentage of customers that will adopt the service will likely be in the single digit percentages. So sure, there will be some revenue generated. But with smartphone adoption skyrocketing, the opportunity to generate significant cost savings — if these estimates are correct, and represent variable costs — by giving it away for free is far more significant than the revenue generating opportunity.
Bottom line: Don’t get me wrong. RDC may be a very important feature when it comes to attracting customers to mobile banking. But it’s not why people “understand the value” of mobile banking, and is unlikely to be a significant revenue generator.