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August 2009
Looking Beyond the Averages when Offering RDC to Small and Home Businesses

While the economy has been putting pressure on banks and their customers, banks still want to attract and retain desirable customers. In tough times its more important than ever to avoid working with averages and instead to target desirable types of business with the right products. Remote Deposit Capture (RDC) has the potential to be the right product for some types of small and home businesses.

When we use averages for small businesses and home businesses we miss important texture. These businesses tend to think of themselves first in terms of the business they are in rather than that they are small. When we use averages we:

   1. Mix non-cash businesses in with businesses that also need to deposit cash, and hence go to the bank; and
   2. Fail to recognize that the average size of deposited check varies significantly with industry, and consequently how large the business is in
   revenue and how valuable an RDC service is to them.

A person selling a consumer product might have an average check size of under $100 and also be receiving cash; while attorneys, consultants, accountants, engineering firms, real estate offices, and manufacturers can have average check sizes in the thousands of dollars and not receive any cash. Just because a customer deposits only a few items doesn’t make them a non-attractive customer, or a poor candidate for RDC.

Surveys show small businesses have a strong awareness of RDC and it benefits. They place a higher per transaction value on the benefit than higher volume depositors, because the time go to the bank doesn’t appreciably vary with number of items to deposit, and the deposit is often made by someone more highly paid than a clerk.

After identifying the right customer segments, the next step is deciding how to profitably deliver the service to those small and home businesses that want it and are willing to pay for it. A look at how RDC evolved my help.

RDC was largely an outgrowth of check image clearing, and was developed by transaction professionals with a volume orientation. Check capture devices, even the low end ones, were expensive. Banks largely started by offering the service (the RDC name came later) to high volume depositors. It was also offered to businesses that demanded it. Some banks started offering RDC in order to satisfy an important customer. "Branchless" banks, with limited existing deposit taking options, started looking at RDC as a better way to serve existing customers and attract new ones. They needed a low cost delivery solution in keeping with what customers would pay or they could pay themselves from the savings from not having a costly branch network.

Banks wanted to avoid for themselves and their customers the high cost of a dedicated check scanner. There was also concern over the complexity of existing PC based solutions, managing distribution and maintenance of devices, and the need to provide customer technical support.

The idea of using devices the customer already owned emerged. Lighthouse Consulting Group filed in 2005 a patent application for using fax machines and general purpose scanners for RDC. USAA started offering a service where the customer used their flat bed scanner to capture check images. A number of manufacturers began offering very basic lower cost scanners for use with the customer’s PC. This was followed by cell phone based capture.

The expectation was that since the customer owned the device, with minimum training and support they could use the device for check image capture. Again we need to look beyond the averages. Device availability varies with industry and size of business. A very large percentage of small businesses with employees of all types have a fax machine. Multi function devices are more prevalent in home businesses and the very smallest businesses. The perceived level of convenience of use varies amongst alternatives based on check volume and how their use integrates into the business. What is convenient for a single check is not for 10 or 100.

In these trying times RDC can be a tool for customer attraction and retention, but one must look beyond the averages and look at the characteristics of potential target segments — number of checks deposited, average check size, types of capture devices the customer already has, how the proposed deliver mechanism fits into their business model, their perception of convenience, and their willingness to pay.


March 2011
Small and Home Busines Check Deposit Practices 2010-11 Survey Results

October 2007
Small Business RDC Survey Results



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