Some Small and Home Businesses Willing to Pay Large Premium for RDC
Small and home businesses (SHBs) are willing to pay a per check premium
in order to make deposits from their office using special carriers and
fax (see sidebar – 2010-11 Survey of Small and Home Business Check
Deposit Practices). While the survey question was specific to our
CheckFaxRDC solution, we believe the results have general applicability
to SHB RDC. The average premium willing to be paid was $0.37 per
check, but there were significant relatively equal peaks at $0.10,
$0.25, $0.50 and $1.00 suggesting a segmented market. Further
investigation showed this was related to the number of checks deposited
per month and the value of the person making the deposit.
The premium derives from
the perceived cost of depositing a check, and how much one is willing
to pay to avoid that cost (the $0.37 above). The perceived cost,
which in the survey averaged $17, and had a range up to $150 per check,
is driven by:
• Number of checks per deposit,
• Number of trips to the bank,
• Time it takes to go to the bank, and
• Value of the person going to the bank.
The first three drivers
had values that one might expect. The average number of checks
deposited per month was 37. For those depositing 100 or fewer
checks per month the average dropped to 15. Trips to the bank
average 4 per month, with a range of from 1 to 22. Time to go to
the bank averaged 21 minutes.
What is surprising was
the range of values for the person making the trip to the bank, which
ran from $0 to $500 per hour. While 55% of respondents valued the
person going to the bank at $50 or less per hour, the other 45% placed
much higher values, clearly indicating non-clerical personnel making
observation is an average business size of 6 employees and inclusion of
business types that typically deposit a few large checks per month. A
recent article on our website identifies those industries. To get to
100 checks per month these businesses needed to have 10 to 25
employees, which is fairly good size by SHBs standards.
The SHB market is huge,
including 20.1 million non-cash businesses depositing 100 or fewer
checks per month. In aggregate they deposit 4.5 billion checks per
year. Businesses without employees account for 16.8 million of
the 20.1 million and deposit 3.0 billion checks. The 3.3 million
businesses with employees deposit another 1.5 billion checks.
The portion of the SHB market willing to pay a per check premium is
large. Many of these businesses are highly attractive customers to
banks. Because of their low deposit volume a variable cost solution is
needed. Because the person preparing and making the deposit does
it as an adjunct to other responsibilities the RDC solution has to be
simple and easy to use.