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Embracing Technology to Drive Competitive Advantages and Efficiency Gains

By: Rob Klein

Community banks have long looked to technology to help them achieve operational efficiencies throughout the institution, from core processing to front-line teller operations. Technology has also been leveraged by many for competitive advantages, positioning the community bank to offer a wide range of services that will attract and retain customers.

The 2010 ICBA Community Bank Technology Survey showed that technology continues to be a critical area for most community banks with 82 percent indicating steady or rising technology budgets. Sixty percent plan to evaluate and integrate new technologies, an obvious indicator that community banks are not sitting still in their quests for greater efficiencies and competitive positioning. It is clear that innovative technology is seen not merely as a “nice to have” but as a “must have” in order to compete against larger rivals.

Of course, competition at its core is about the battle for customers. During the 2008–2009 banking turmoil, many community banks were actually able to gain new business as uneasy customers sought the type of relationship banking that is the hallmark of community banks.

However, competition for customers is as fierce as ever, especially for the profitable commercial and retail accounts. To build the base of business customers, community banks need to offer services that will attract these customers — including remote deposit capture, check imaging and archiving, and multiple document processing. These capabilities also enable community banks to expand their reach far beyond the one-mile radius that a typical branch serves. Recent technology breakthroughs have made these services more affordable and feasible — even right at the teller line.
Capturing New Customers Through Advanced Technology Solutions

Remote deposit capture in particular is of increasing importance to commercial and merchant customers, yet 30 percent of community banks do not offer it according to the technology survey. Another 58 percent do offer RDC but outsource the function. Clearly, there is opportunity here. Again looking at competitive positioning, 97 percent of larger banks with more than $500 million in assets offered RDC. Merchant customers are looking for banking partners who offer RDC as they realize the merits of scanning checks right at their location and transmitting the data electronically for posting and clearing — transportation time and costs are saved and their accounts are credited faster.

Adoption barriers include the merchants’ banks not offering the service and limitations of check-scanning equipment in terms of speed and image quality. Recent technology, however, is now available for scanning and capturing images at 400 checks per minute, making RDC more viable for check-intensive merchants and commercial accounts. A further huge advantage is that these same devices can also process currency, bringing an extremely attractive solution to these customers who generally will also have heavy cash processing needs. Community banks can bring these dual-efficient solutions to the table and secure more market share within this profitable customer segment.

Helping commercial customers increase internal efficiency while also gaining the benefits of RDC can strengthen the offering to these customers, build customer satisfaction and expand account growth. The potential is considerable — of the 24 million businesses in the UnitedStates (2007), approximately 16–17 million are potential RDC users. Further, putting these devices at customer locations also expands the geographic reach of the community bank as the banking relationship is not dependent on physical accessibility.

Improving Operational Efficiency and Customer Satisfaction

This same technology can be parlayed for competitive advantage even for accounts that do not want to incorporate RDC or prefer the in-person type of banking relationship. Community banks can themselves use this two-in-one technology right at the teller line and with the ability to run checks and currency quickly, can market this service as a time-saving solution. Merchant accounts can eliminate the need to separate checks and currency, simply wrapping them together and bringing them to the bank. More importantly, because tellers can process and balance the customer’s entire deposits — checks, cash and deposit slips — right at the window, the customer gets quicker credit in his account, knows he has no errors and is assured that the deposit is in sync with what was entered into the account system at the store.

Processing and imaging checks, cash and deposit slips together is called multiple document processing, a concept that also brings tremendous operational efficiencies to the bank. Many financial institutions are trying to migrate as much as possible to teller capture, where deposits are balanced at the teller and deposits remain intact. This eliminates costly and time-consuming balancing and MICR line correction errors in the back room. Today’s technology even allows elimination of cash-in/cash-out slips because the entire deposit is electronically scanned, balanced and transmitted to check operations for processing.

Conservative management is one of the defining characteristics and success factors of community banks. At the same time, the challenging competitive landscape demands innovation and differentiation, both of which today’s technology can help achieve. Check imaging and remote deposit capture have already played a key role in the growth strategy for many community banks. As technology innovations enable easier adoption along with added capabilities, banks can compete even more effectively and gain market share.

Meeting the competition head-on by being able to provide the services that customers want is good. Being able to beat the competition by offering a level of services not currently in wide use is even better.

Rob Klein is director of enterprise solution design and integration at Cummins-Allison Corporation, Mount Prospect, Ill. For more information, visit

Vendor Q&A

What are the latest developments in RDC?

Harland: Financial institutions are expecting additional enhancements around risk management. Fraud still is important, but there are only small isolated cases today as merchant capture is largely done for small business clients. As the industry expands to consumer capture technologies, the risks will increase and providers need to provide the tools to manage those increased risks.

Bluepoint: Electronic check processing continues to spread to capture points beyond the branch. In the next year, look for expanded deployment of teller capture, ATM capture and mobile capture. Bluepoint is also seeing growth and more demand for RDC technology within the back offices of financial institutions, particularly in the mailroom with remittance processing combined with deposit processing. Financial institutions are exploring ways to add additional value to check processing, particularly with fraud, counterfeit and check-loss reduction enhancements.

CFC: The second half of 2011 has brought a renewed focus on remote deposit capture. Financial institutions that previously purchased RDC solutions that have not kept pace with their needs (logo/branding, thick client software solutions, FI-dependent installation and support models) are causing FIs to replace these original solutions in favor of lower cost, less complex and less internal resource-dependent RDC solutions.

What trends are you seeing in terms of bank deployment and business demand/acceptance?

Bluepoint: The noise about business or corporate RDC has been drowned out by the buzz of mobile RDC. It still represents a lot of potential growth for financial institutions looking to bolster their business banking services, but hasn’t seen the same type of growth as other RDC points.

CFC: Remote deposit continues to be added by FIs that, up until now, felt little customer or competitive pressure to offer remote deposit capture services. Small community banks are adding remote deposit to satisfy their best accounts and to retain customers who may leave in search of another FI that already offers remote deposit services.

Remote deposit continues to be sticky with less than 2 percent of businesses discontinuing using remote deposit once they have had it for more than 60 days. We are seeing an increased trend of business owners who are willing to pay for remote deposit capture services once they understand the benefits and what their actual costs of taking deposits to their financial institutions are.

Harland: Many banks are getting more aggressive in their plans and efforts to market RDC services to their small business customers. Many banks focused first on their middle market and larger customers. As the price of the scanners has come down, and there are new options such as using a mobile device, the attraction of the offering for the small business has increased. Creative programs are being developed to market RDC to small businesses, often through the branch network.

Is RDC winning new customers for banks?

CFC: Yes! Community banks that are focusing on customers’ needs are winning new business accounts. Large national and regional banks have done a poor job of offering customized solutions to their customers, choosing to use a one-size-fits-all approach particularly with remote deposit. Most small businesses have been ignored. Community banks will find opportunities in offering more affordable remote deposit solutions to these small business and home office customers. Another market that has been underserved is larger companies that process remittance coupons with their check payments. These companies want to continue to process their own payments and want more capabilities than just capturing and transmitting checks to their banks. Banks that have integrated accounting capabilities in their remote deposit capture solutions will have an opportunity to obtain these large accounts as new customers.

Bluepoint: Mobile RDC on its own isn’t enough to attract new customers. However, when deployed as part of a comprehensive mobile strategy, the customer engagement becomes richer and more valuable in terms of accessing up-to-date account information, managing finances in a meaningful way that includes sending payments through multiple methods, and even applying for new financial products from a bank or credit union. When launched as part of an integrated mobile banking strategy, mobile RDC will be key in winning new customers for banks.

Copyright (c) December 2011 by BankNews Media.