By Patti Murphy
ProScribes Inc.
Kiosks are an old concept receiving renewed interest as banks look for ways to grow without incurring huge capital outlays. And like most things radically altered by technology, kiosks are getting smaller and virtualized. Indeed, it appears the ubiquity of mobile phones could render free-standing kiosks obsolete, replaced by individual smart phones loaded with payment and other financial apps.
Most Americans have mobile phones (87 percent according to the Federal Reserve), and a growing number of those devices are smart phones (50 percent as of May 2012 according to The Nielsen Co.), meaning the devices can access the Internet, take quality photos and perform countless other tasks, including remotely depositing checks.
Jim DeBello, President and Chief Executive Officer at Mitek Systems Inc., said mobile remote deposit capture (RDC) "puts a financial services kiosk in every customer's pocket." I spoke with him at the September 2012 RDC Summit, an annual event focused on remote capture technologies. Mitek is a huge player in this space, with hundreds of financial institutions (FIs) implementing its software to support mobile RDC offerings, including most of the top 10, and hundreds of other FIs in the queue. If you've ever deposited a check using a mobile device, chances are Mitek's software was running in the background.
DeBello's comment holds merit. In some regions of the world mobile devices already double as bank access devices. According to the World Bank, at least half the world is unbanked; that includes 2.5 billion adults worldwide. Many of these folks live in areas that have no bank offices, such as in South Asia where two-thirds of the population is unbanked, and throughout Africa, where upward of 80 percent of adults are unbanked. These people are starting to use mobile phones to access banking services and transfer funds.
Also, there's a big push for mobile banking underway in India, where 91 percent of consumer spending is still done with cash, and mobile phone penetration is one per capita, according to government data. And several mobile banking and payment networks are competing for a share in this burgeoning market.
Among them is Money on Mobile (MoM), which enables consumers in India to initiate payments with mobile phone texting functionality. MoM is backed financially by Calpian Inc., a Dallas-based firm that purchases ISO portfolios through a newly formed subsidiary, Digital Payments Processing Ltd., based in Mumbai, India.
When I spoke earlier this year with Harold Montgomery, Calpian's CEO, he likened MoM to M-pesa, a five-year-old initiative in Kenya run by that country's largest mobile services provider, Safaricom Ltd., that is being replicated elsewhere in Africa. M-pesa uses text messaging to support account deposits and withdrawals, air time top-ups and person-to-person payments in addition to other routine transactions. At last count, about 75 percent of Kenya's unbanked population had used M-pesa, up from 20 percent in 2008.
Montgomery described MoM in terms that would make any network owner or operator proud, noting that total transaction values are growing at rates between 7 and 10 percent a month. And he said Calpian plans additional investments in MoM over the next 18 months. "This company has a big future," Montgomery said.
Initiatives like MoM and M-pesa are well suited to developing countries where mobile phones have emerged as a lifeline, especially for the rural poor. The closest we come to something like this in the United States is the Isis Mobile Wallet, a near field communication-based solution and joint venture between the three leading mobile carriers.
There are other electronic wallet products; some have been introduced by banks, others by nonbanks, like PayPal Inc. I'm not convinced that any of these initiatives will drive mobile banking.
I believe broad-based consumer adoption of mobile check deposit will change the way U.S. consumers think about and interact with banks. And we can thank leading banks - most notably JPMorgan Chase & Co. and Citigroup Inc. - for spending millions of advertising dollars showing us just how cool it is to deposit checks using a smart phone.
"RDC has gone Top 40," said Chris Chaten, Vice President, RDC Product Management, at Chase, in addressing the RDC Summit. "It's mainstream now." Chaten said consumer and corporate clients alike are demanding mobile RDC, which benefits Chase by reducing branch traffic.
It's not just big banks that are benefiting, either. Community banks and credit unions report notable increases in deposits and customers from mobile check deposit rollouts. "It's all about the consumer experience," DeBello said. Using a mobile device to snap a picture and deposit a check is a cool experience; the proof is in consumer adoption.
Alix Partners, a research and consulting firm that follows mobile trends, reported that over a quarter of mobile banking adopters (27.4 percent) were mobile RDC regulars as of the second quarter of 2012. And these are among the most sought-after customers: they are young, affluent and buy more banking products than other consumers, according to the data.
More than half (56 percent) of consumers who don't use mobile deposit indicated they would if their FIs offered the service. In fact, the ability to make mobile deposits is the mobile banking feature that actually would get consumers to switch banks, according to Alix Partners.
And then there are the unbanked. "There's a sense of urgency" among FIs to find cost-effective ways to serve the unbanked and underbanked, said Terri Ferrisi, Vice President, Cachet Financial Solutions, an RDC solutions provider, during a panel discussion at the RDC Summit.
Luz Urrutia, Director of Alternative Financial Services at Community and Southern Bank, in Atlanta, was also on that panel. CSB's CSB xpress service caters to the unbanked and underbanked. CSB xpress features a prepaid debit card that customers can deposit checks to, and it is tied to other financial services offerings like money orders. CSB uses Spyke, The Good Funds Network to drive its check cashing service. (See "When RDC meets mobile" by Patti Murphy, The Green Sheet, July 23, 2012, issue 12:07:02 to learn more about Spyke.)
With mobile phones, consumers can now deposit checks anytime, anywhere. Extending that connection to other banking activities is a logical progression. Then mobile will become something akin to a financial kiosk at your fingertips, or in your pocket.
Patti Murphy is Senior Editor of The Green Sheet and President of ProScribes Inc. She is also the founder of InsideMicrofinance.com. Email her at patti@greensheet.com.
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