Bank Board Letter January 2015 : Page 2

A Gold StAndArd EmErGES In the words of Wells Fargo CEO John Stumpf at an investor conference in 2012, “The bank is in the market to buy insurance companies. A key reason: Wells is one of the largest originators of mortgages and used-car loans and those borrowers all need insurance.” Stumpf has led the entrance into one of the first product suites that meet the gold standard for value-added fee income Ð a uto and home insurance. Let’s run the test. • 100 percent of bank customers purchase auto and/or home insurance. • 100 percent of customers repurchase these products every year. • These products generate recurring/annuitizing revenue Ð average duration over six years. • These products do not create balance sheet risk Ð the car-riers pay any claims. • These products are not impacted by economic cycles Ð even at the height of the great recession, people paid their insurance premiums. From Product orPhAn to An ‘AiSlE’ in thE StorE — cASE StudiES At Mid Penn Bank in Millersburg, Pa., CEO Rori Retrievi un-derstood that the benefits of offering insurance weren’t limited to the industry’s largest banks. A community bank executive for over 20 years, he knew banks all had some insurance products kicking around on the platform: term life, credit life, ID theft etc. Ð but that they were typically orphans within the bank Ð no ownership, no commitment and no ongoing management. In fact, most bank-ers couldn’t explain the “fee income” characteristics of these prod-ucts. Rori jumped in and embraced the gold standard of insurance sales as an “aisle” in his store. He launched the Mid Penn Insurance Agency, stocked its shelves with the auto, home and commercial insurance products 100 percent of his customers buy every year, and over the last 12 months, 49 percent of the customers that Mid Penn Insurance Agency quoted, ended up buying a policy. By offering a comprehensive suite of insurance products alongside its traditional banking products, Spencer County Bank in Santa Claus, Ind., has found that it can distinguish itself in the community as a “one-stop shop for financial prod-ucts and services.” As Merle Kendall, president and chairman of the bank noted, “Creating an ‘insurance aisle’ in our stores af-fords us the opportunity to provide a complete product offering and the technology to leverage our bank’s lending opportunity and online banking opportunities.” This value proposition has become increasingly important as several of the nation’s largest insurance carriers continue to expand their retail banking and lending presence, evident in State Farm’s recent “Borrow Better Banking” campaign. For Spencer County, which has insured nearly 1 percent of its retail households over the past 12 months, an “insurance aisle” not only represents an opportunity to grow fee income but also provides protection from competitors. Finally, banks like Mid Penn and Spencer County are combining their commitment to offering insurance to cus-tomers with the same energy they do core banking products with the rapidly growing adoption and utilization of their online banking portal. By integrating their insurance aisle into their digital environment, they enable customers to have real-time access to the products they want and need, like auto, home and business insurance, AD&D, ID theft, roadside assistance and travel protection, and supplementing and replacing traditional third-party direct mail campaigns, statement stuffers, rack brochures and other outdated analog distribution methods. These innovative bank executives are proving that when their customers visit the bank online to pay bills or check balances, the bank can offer them addi-tional value-added products and services, while also driving a critical source of non-interest income. The pivot to understanding and embracing a new generation of products that generate value-added fee income is already under way. It’s a true revolution for both the banks and their customers. Jeff Chesky is president and CEO of Insuritas, based in East Windsor, Conn. He can be contacted at jcchesky@insuritas.com. StepS to a SucceSSful Mobile RDc pRogRaM By RoBB GaynoR S martphones have transformed into more than just a means of communication as consumers become increas-ingly comfortable with their capabilities. One area in which this comfort has become most evident is in the dramatic growth of mobile banking usage: on average, 25 to 35 percent of a bank’s customer base actively uses the mobile channel. What started out as a way to quickly check balances Next moNth: high-Performing Banks BankNews.Com Updated has evolved into full-service banking via the mobile device. The available features and clear demand from consumers has even led some institutions, such as Moven and BankMobile, to launch as mobile-only banks. Growth in mobile banking functionality can partly be at-tributed to advances in smartphone cameras. Mobile remote deposit capture Ð the service that allows customers to take a picture of a check and deposit it via their mobile device Ð is one area that has benefited greatly from these camera advances. Checks may in general be going away, with decreasing volumes year-over-year, but there are many checks still out there and mobile check deposit is a critical part of a bank’s digital strategy. In the feature’s early history, it was more common for images to be declined due to poor quality, driving down customer satisfac-tion and usage. Image acceptance, however, has improved and with it, so has mobile RDC adoption.

STEPS TO A SUCCESSFUL MOBILE RDC PROGRAM

Robb Gaynor


Smartphones have transformed into more than just a means of communication as consumers become increasingly comfortable with their capabilities. One area in which this comfort has become most evident is in the dramatic growth of mobile banking usage: on average, 25 to 35 percent of a bank’s customer base actively uses the mobile channel. What started out as a way to quickly check balances has evolved into full-service banking via the mobile device. The available features and clear demand from consumers has even led some institutions, such as Moven and BankMobile, to launch as mobile-only banks.

Growth in mobile banking functionality can partly be attributed to advances in smartphone cameras. Mobile remote deposit capture Ð the service that allows customers to take a picture of a check and deposit it via their mobile device Ð is one area that has benefited greatly from these camera advances. Checks may in general be going away, with decreasing volumes year-over-year, but there are many checks still out there and mobile check deposit is a critical part of a bank’s digital strategy. In the feature’s early history, it was more common for images to be declined due to poor quality, driving down customer satisfaction and usage. Image acceptance, however, has improved and with it, so has mobile RDC adoption.

AND SD IT GRDWS
Mobile RDC is one of the most impactful banking innovations in recent history due to the convenience it affords customers. They no longer need to physically visit a bank branch to deposit a check; instead, capturing the image through their mobile camera allows for quick, on-the-go banking, decreasing the time and money spent on travel to a physical branch.

It's no surprise that our usage data from 3.5 million monthly logins across 250,000 active mobile users shows a more than 50 percent increase in mobile RDC usage in the last 12 months. The statistics demonstrate a clear increase in awareness; it's not the average number of deposits per user that has grown, but the sheer number of users of the service. Typically 20 to 25 percent of a bank's active mobile banking customers are using mobile check deposit. The average deposit size is about $450 and customers are making an average of 2.75 deposits a month. Between July 2013 and June 2014, institutions that had been live with mobile RDC for 12 months saw a 45 percent increase in the number of checks deposited each month. Among our end-user base, mobile RDC ranks as the fifth most-used feature.

In addition, the Mobile Financial Services Tracking Study by Alix Partners found that 22 percent of smartphone/tablet owners are using the service compared to 18 percent in the first half of 2013. There is also seasonality related to the volumes around mobile check deposit; usage of this feature peaks during the holidays. In December 2013, volumes spiked by 25 percent as more checks flowed through the mobile channel. Interestingly enough, volumes went back to historical averages come January. This is potentially driven by the use of checks as gifts from family members.

IMPLEMENTING AN RDC PRDGRAM
Mobile RDC has become ubiquitous; according to a 2014 survey by RemoteDepositCapture.com and Mitek, nearly 63 percent of U.S. banks offer it with 33 percent planning to do so within the next year, leaving those that don't in a tough competitive position.

However, some banks are still concerned with risk factors. There is the possibility that a customer could attempt to deposit a check twice, either by mistake or with fraudulent intent. While this is a risk, most RDC technology provides advanced duplicate detection that prevents an item from being deposited twice, or cashed in the branch after being deposited through the phone. In fact, according to the RemoteDepositCapture.com survey, 80 percent of financial institutions' mobile RDC services reported zero losses resulting from the technology.

The benefits of mobile remote deposit capture ultimately outweigh the risks that banks may face; lower transaction costs, improved teller efficiency, faster funds availability and meeting customer demand leave banks with no choice but to deploy the service if they haven't already.

There are several areas banks must focus on to ensure a successful mobile RDC program.

• Careful vendor selection is vital, but has also gotten easier as the number of reputable providers has increased. A vendor should be flexible in order to suit how your bank wants to deploy the technology and offer integrations with a wide a range of check processors.
• Segmentation capabilities greatly enhance a mobile RDC program. Due to the potentially risky nature of the service, many banks place strict limitations on how it can be used. They may not allow customers to use the feature until they have had an account for three months or place tight limits on the dollar value that can be deposited to reduce potential losses. But with segmentation, instead of the bank applying strict rules across the board, they can be configured to specific customers. For example, while most customers are limited to $300 per item, perhaps higher asset account holders could have a more flexible limit.
• Mobile RDC programs can't be successful without marketing efforts that drive adoption. The first step is conducting in-app marketing that promotes the availability of RDC to current mobile banking customers. In-branch marketing material, website advertisements and a local ad campaign can make other account holders and prospective customers aware of the service. Always keep in mind that messaging should be consistent across all channels.
• Training customers on how to use mobile RDC is often overlooked, but is not only useful in driving adoption, but also in limiting issues for both the customer and the bank. One way to achieve this is to have tellers help customers open and use the feature in the branch using "fake" checks, or checks with a nominal value. Making customers comfortable with the service will increase usage. Points to emphasize are ways to capture a good quality image, as well as the need to sign the back of the check. Our data shows that 25 percent of the time a check is rejected, it is because the back of the check is un-signed.

We have reached a point where consumers expect to have RDC capability in their mobile apps. It provides a safe and easy option for bank customers who would prefer not to visit a physical branch each time they receive a check. Without mobile RDC, banks risk losing customers to the institutions that do offer it.

Robb Gaynor is chief product officer for Malauzai Software Inc. More information is available at www.malauzai.com.

Read the full article at http://omagdigital.com/article/STEPS+TO+A+SUCCESSFUL+MOBILE+RDC+PROGRAM/1908692/242776/article.html.

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