The Consumer Capture Opportunity - Here we go again??

Transcription

1 The Opportunity - Here we go again?? Presented By: Bob Meara, Senior Analyst, Celent John Leekley, Founder & CEO RemoteDepositCapture.com September, 2008

2 Today s Webinar is Brought to you by Fiserv Fiserv Source Capture Optimization TM enables a common web platform for remote deposit capture at the Consumer, Merchant, Branch, Teller and ATM. Visit to learn more Or call (800) or victoria.lant@fiserv.com Remote Deposit Capture Title 2

3 Contents 1. What is? 4 Solution Requirements Solution Providers 2. Basis for interest 10 Why some FIs are investing 3. Operational Results 13 Current Adoption Picture 4. What to Expect 19 Small & Micro Business Consumer 3

4 What is? Refers to RDC solutions destined for consumers and/or small/micro businesses Low check volume Occasional usage Does NOT necessarily imply or suggest a broad consumer target audience Consumer capture may be more about the solution than about how and where it may be used 4

5 What are the Driving Solution Requirements? Low cost Requirements Rational Must profitably enable low price points (FREE) Easy to provision and support Exceedingly simple user interface TWAIN scanner support* Will potentially serve a large number of users Support costs could shipwreck P&L Users aren t trained treasury personnel Usage may be occasional Business case may not support the use of specialized scanners and associated warehousing, provisioning, maintenance and support * There remains considerable consternation around use of these scanners, although support is clearly growing Source: Celent 5

6 What Makes a Solution - 1? Client Attributes Web client architecture ASP delivery option Online help (tutorials, imbedded multimedia or context sensitive) Integration with online banking portal Single sign-on for proper user authentication Common entitlements and administration Reasonably advanced image analytics IQA and IUA prior to FI review Automatic image cropping and skew control Duplicate item detection or immediate depositor notification Deposit approval Funds available Prior deposit status notification Source: Celent 6

7 What Makes a Solution - 2? Back-office Attributes Automated client screening and decisioning Automated provisioning and entitlements through a single sign-on Real time IQA/IUA Front & rear image Automated risk management tools FI-controlled holds Velocity and deposit limits Multiple deposit and item variance flags Duplicate item detection Activity audit trails Declined deposit management Appropriate deposit review Source: Celent 7

8 Emerging User Limitations Deposits must be balanced One item deposits appear common* No codeline correction Deposit frequency, velocity and amount limitations Specific endorsement requirements (e.g., for deposit only ) Widely varying funds availability But, the longest holds seen are minimal compared to commonplace desk and mail float Many FIs provide next-day availability on deposits * One vendor is planning multiple item deposit capability for small businesses 8

9 Solution Provider Landscape Few RDC vendors have solutions, but more are on the way Mid 2008 snapshot: ISV Product Availability Diebold ERAS Beta unknown GA EasCorp DepoZip Oct-07 Ensenta Digital Deposits Mar-08 Fiserv Consumer/SOHO Source Capture Aug-08 FIS Express Deposit May-08 Goldleaf Sierra Xpedite Expect Q Metavante Merchant Direct Expect Q ProfitStars Expect Q SEI First Touch icapture Expect Q WAUSAU Web DDL Expect Q Vsoft Agile Home/Office Expect Q Source: June 2008 ISV survey, n= 30 9

10 Basis for Interest Why do this? Section 2 10

11 Reasons Vary: Scoffers Abound Interviews among early adopters (primarily credit unions) paint a compelling picture: Customer service: make deposits easier Cost savings: make deposits less costly Deposit growth: bring deposits home The rational for a well-branched retail bank may be less compelling Any FI committed to self-service should recognize the value of consumer capture: 90% of teller transactions are check related. Source; FI interviews Teller Transaction Mix (Reported Share of Teller Transactions) Consumer check deposit 30% Check cashing 22% Other 11% Commercial deposit 18% Consumer check deposit with cash back 19% Source; Celent FI survey, December 2007, n=157 11

12 USAA an absolute no-brainer Founded in 1922 as a mutual insurance company, now a diverse provider of financial services with US$127 billion in owned and managed assets USAA Federal Savings Bank founded in 1983 US$27.2 billion in deposits Nearly doubled rate of deposit growth since Deposit@Home launch* 5.1 million member HHs 1 branch 66% deposit growth since 2005 Scanned deposits received before 8:00 PM CT receive same day credit Source: FDIC, USAA * : 18% avg. CAGR : 32% avg. CAGR 12

13 Operational Results O.K., how bad has this been? Section 3 Remote Deposit Capture, LLC, Celent 13

14 Few FIs have Solutions FI Snapshot Location Provider Launch Target USAA Digital Federal CU $27b global membership $3.5B, 344k mem 170k online San Antonio Proprietary Dec 06 Marlboro, MA EasCorp Mar 08 Sharon CU $590 m Sharon, MA EasCorp Nov 07 Hanscom CU $280 m Bedford, MA EasCorp Nov 07 Service CU $1B Portsmouth, NH EasCorp Dec 07 Qualified members Qualified members End users Aug '08 Confidential 16,000 2,000e 1,200e 4,500e Randolph Brooks CU $2.5 B, 250k mem San Antonio EasCorp Spring 08 Unknown First Command Bank $560m 85k clients Online Bank FIS Sep 08 All with restrictions <100 Star One CU $3b, 77k mem Santa Clara, CA Ensenta Jun 08 Unknown First Source Bank 80 branches 80k Accounts South bend, IN FIS Q

15 Results from Early-Movers Operational Results Exception rates similar to branch deposits Exception mix trends away from amount to codeline correction Nuisance level of duplicate presentment caught & corrected prior to posting No evidence of fraud unique to channel Favorable reductions in branch traffic cited by several FIs Lower processing costs than branch deposits User Experience Predominantly good user experience with modern solutions Helps: Intuitive user interface and workflow Decent image analytics Support staff with personal experience 15

16 An Early Glimpse: First Command Bank Summary: 12 year old bank. $560 million in assets 85k clients: 90% banking online Highly mobile military client base 200 independent contractors doing financial planning Outsourced I.P. with FIS Strategy: Increase DDA penetration among military client base: currently 60% Improve remote banking capability and user experience. Solution: FIS Express Deposit, 1 check per deposit 100% deposit review initially Results: Too early to tell September 2008 launch Expects 50% of internet banking users to qualify and enroll Internal pilot experience was favorable 16

17 An Early-Mover: Digital Federal Credit Union Summary: $4.3 billion, 19 branches plus shared branch and ATM locations 170,000 active online banking users (50% of member HHs) Historically reliant on shared branching, foreign ATM and mail-in deposits Strategy: Increase % of members relying on DCU for primary financial relationship Reduce cost of remote deposits Seek greatest adoption consistent with managing risk Solution: EasCorp provided, web client, TWAIN, single item deposits Integrated with online banking platform with single sign on and entitlements Thorough automated deposit review Results: 3,000 signed up in the first two weeks based SOLEY on an internet link 16,000 users within first 5 months (~10% of online user base) Operationally satisfying; zero fraud; zero losses 17

18 Lopsided Risk Management among RDC FIs So far with RDC, most banks rely heavily on client risk management Making it difficult to qualify for the product Paying little attention to the deposits once onboard In sharp contract, Credit Unions show a much more balanced approach Making it comparatively easy to qualify Utilizing a full array of deposit monitoring tools to manage risks 18

19 What to Expect Here we go again? Section 4 19

20 Consumer capture is just getting started But could become a factor in short order RDC Adoption Consumer >$50 BN $1 BN - $50 BN <$1 BN Commercial Bank Retail Bank 0% 20% 40% 60% 80% 100% Respondents (%) Have a solution Piloting a solution Planning a solution Considering a solution Source: Celent survey of financial institutions, Dec. 2007, n=157 No plans to impl. 20

21 Why this may not be another Rush to Market 1. Comparatively low priority Image infrastructure readiness among nearly 50% of banks Unsatisfied commercial and business banking RDC ambitions Banks will launch RDC among SMBs before doing so among consumers 2. Lackluster business case Some banks will struggle with the idea of redirecting branch traffic 3. Risk aversion Despite no evidence of meaningful loss (industry wide) banks remain fearful FFEIC guidance not yet published TWAIN scanners don t have MICR read capability 4. Understated competitive threat Post Recording Update: The upcoming FFIEC Remote Deposit Capture Guidance will apply to all forms of RDC, including. 21

22 Why Banks need to take this Seriously $Billions in Deposits 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Top non-banks and foreign banks realized a 96% and 21% CAGR, respectively compared to US banks 8% e 436 1,351 5,224 9,289 2,938 2,918 4,583 7,199 Non-banks Foreign Top 30 Top 30 same 2007: Cap One, ING, HSBC, RBS, BNP, as 2001 Countrywide TD, Mitsubishi UFJ, BBVA +RBC US Banks 2013: +USAA, E*Trade 22 = ~$1.3 trillion in deposits lost to non- US Banks = ~$500 billion in deposits lost to non- US Banks

23 Most banks think Consumer capture will remain a niche product offered by a minority of banks A few banks appear to be acting in expectation of widespread adoption <$1 BN $1 BN - $50 BN >$50 BN Consumer capture will be a niche application and be offered by few financial institutions. Consumer capture will be a niche application but will be offered by many banks 56% 62% 41% 12% 18% 30% Consumer capture will see widespread adoption by both banks and consumers 21% 15% 22% Source: Celent survey of financial institutions, Dec. 2007, n=157 23

24 But What does a Niche Market Mean? n: a specialized and profitable part of a commercial market; a narrowly targeted market Insignificant? Unimportant? Other Niche markets: Healthcare Mass Affluent Micro Business Private Banking Consumer capture may play an important role in substantive niches within both small business and consumer market segments Consumers received 25% of checks in billion of them 7.2b Source: Federal Reserve 2007 Payments Study 24

25 Checks are important to SMBs! Checks as a percent of total receivables 45% Respondents (%) 40% 35% 30% 25% 20% 15% 10% 5% Checks represent 70% or more of receivables for twothirds of SMBs 0% % 70-84% 50-69% 25-49% 0-24% Check share of total receivables (%) Source: Celent SMB survey, June 2007, n=325: 25

26 Daily check payments are common, with size of business a good predictor of volume Half of small businesses receive less than 3 checks per day Small business spectrum of daily check volume Daily check volume by size of business 60% Consumer RDC? 14 Respondents (%) 50% 40% 30% 20% 10% Commercial RDC? Average daily checks received (items) % Less than More than 20 0 <$100 K $100 K- $500 K $500 K-$1 MM $1 MM-$5 MM >$5 MM Average daily checks received Size segment (annual revenue) Source: Celent SMB survey, June 2007, n=325: 26

27 Larger SMBs deposit more frequently, but desk float abounds Small business deposit frequency and trip time Average deposits per week Average trip time (minutes) 0.0 <$100 K $100 K-$500 K $500 K-$1 MM $1 MM-$5 MM >$5 MM Size segment (annual revenue) 0 Average # deposits Trip time Source: Celent SMB survey, June 2007, n=325: 27

28 Some SMBs may best be served with existing hardware Especially the majority with low check volumes Small Business Existing Capture Devices Combination CPF device Flatbed scanner Fax machine Magnetic card reader None of the above 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: SMB survey, June 2007, n=325: Please indicate what other document scanning equipment you already have in your office. Respondents (%) 28

29 Another Sweet Spot may be High Net Worth HHs all 16 million of them Financial Assets by Wealth Profile 35% 30% 30% Mass Affluent 32% 25% 20% 15% 10% 5% 18% 21% 0% Mass market Emerging affluent Affluent High net worth Financial asset range <250K $250K to $1MM $1MM to $2MM >$2MM Total financial assets $5.1TN $8.7TN $4.1TN $11.0TN Number of HHs 96 MM 13 MM 2 MM 1 MM Percent of HHs 85% 11% 2% 1% Source: Oliver Wyman s Consumer Profitability Model 29

30 There s Everything to Like about the Affluent General Product Type Penetration by Wealth Profile 100% 90% 80% 96% 97% 93% 81% 76% Active investors High internet banking penetration High % small business owners 70% 60% 50% 40% 30% 63% 52% 48% 56% 58% 29% 29% 25% 40% 30% 47% 49% 33% 20% 10% 0% Homeowner 9% Has a brokerage account Uses internet for banking 4% 1% 3% Subprime 10% 18% Small business owner Has a defined benefit plan < $250K $250K-$1MM $1MM-$2MM > $2MM Source: Oliver Wyman; 2004 Federal Reserve Survey of Consumer Finances 30

31 And Their Ranks are Growing 130,000,000 Mass Market Mass affluent HNW UHNW 120,000, ,000,000 Households 100,000,000 90,000, MM 18.5MM 80,000,000 70,000,000 60,000, Source: Oliver Wyman; 2004 Federal Reserve Survey of Consumer Finances 31

32 Thank you to our sponsor: Fiserv Fiserv Source Capture Optimization TM enables a common web platform for remote deposit capture at the Consumer, Merchant, Branch, Teller and ATM. Visit to learn more Or call (800) or victoria.lant@fiserv.com Remote Deposit Capture Title 32

33 Questions? 33

34 For More Information RemoteDepositCapture.com Resources: RDC Overviews, Benefits & Risks RDC Video Overview RDC Marketplace Scanner Matrix Webinars Community Forums News Archive RDC Insider Articles, Research A listing of recently published research reports can be found at: To learn how your institution can benefit from Source Capture Optimization, please visit or contact Fiserv at (800) ; 1econnection@fiserv.com. Download the free white paper on Optimizing, Centralizing and Capturing Remote Deposits: 34