 With increasing adoption rates for mobile banking and millennials becoming banking consumers, discussions around real time banking are picking up momentum. Big banks that have supported real time banking for private clients are taking about extending it to mobile banking customers and small banks are introducing them as well (e.g. Independent Bancshares). The instant gratification millennials have derived from their hi-tech gadgets is natural to extend into their expectations from banks. They deposit funds; they want to be able to use them right away. They don't care to understand or sympathize with the banking system that takes a few days to clear checks. I have had discussions with customers as early as 2009 around real time clearing and settlements and our conclusion was that back offices were not ready for this level of automation and the business case was marginal. The landscape has changed quite a bit recently. Mobile banking consumers will want access instant access to funds. Also tightening of the regulatory noose around banks' necks has created a desire to create alternate venues to raise fee revenue. Real time banking presents a perfect opportunity for banks that can allow consumers to access "float" funds by updating their deposit balance and other internal systems instantaneously without waiting for inter bank transfers and clearinghouses. Should funds deposited not clear, they can always levy charges for accessing funds using uncleared "float" balances!
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 Every year, I track the statistics issued by various bodies such as NACHA on growth rates of payment instruments. No one needs to guess that checks (cheques if you spell it the British way J) have been declining in volume for the last several years. For example, it is not uncommon to see 5 – 10% reduction in check volumes over successive quarters. So based on this view, I used to think that RDC (Remote Deposit Capture), the mobile application that allows smartphones to capture images of checks and deposit them in the bank account would not be popular. I was proven dead wrong and the demand for RDC applications has been hot. Several banks have rolled out these applications to promote the adoption of mobile banking and to help consumers avoid making a trip to the branch to deposit the occasional check they receive. Almost all top US banks support RDC now.
However, I still wonder how long will these trends last. If people are issuing less and less checks, how long will RDC applications remain popular? One key point to remember - even if checks die completely in the future, RDC would have played an important role – help promote the adoption of mobile banking by consumers and move closer towards “mobile branches” (bank branches in smartphones). We are already seeing this impact in action in the introduction of a new application for paying bills using smartphones by taking a picture of the bill. Mitek’s CEO points out in this interview, the adoption of RDC has helped establish the message that a smartphone camera can be used for financial transactions and that the adoption of subsequent mobility apps for financial transactions may involve shorter cycles. |
AuthorI am a Management Consultant in Banking and Financial Services. Check out my "home" and "about" pages for more details. Archives
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