Western Independent Banker - May/June 2013 - (Page 18)

By Dean Seifert Moving Mobile Banking Toward Acceptance – and Profitability IN THE PAST year, mobile banking has become widely available – but it hasn’t really taken off. As a result, many observers wonder what the potential return on investment is with the technology, and whether it can really contribute to the profitability of financial institutions. The modest uptake of mobile banking is essentially due to the fact that it hasn’t really offered customers a compelling value proposition. That is, it hasn’t had a “killer app” that would prompt consumers to switch from their current habits. The situation is similar to that of Internet banking years ago, where adoption was slow until the killer app of online bill payment drove widespread use. Now, a prime contender for this mobile banking killer app has emerged – mobile check deposit (MCD), which lets customers snap a photo of their checks and send that to their bank to make a deposit. For consumers, MCD adds a new, highly convenient function to the mobile banking platform – an expanded value proposition. We are already seeing a number of new apps that integrate MCD into mobile banking, and all of the top 10 U.S. financial institutions now offer it. Celent Research forecasts that more than 1,000 financial institutions will be offering it by the end of 2013. Banks should be able to leverage this trend to improve profitability in several ways. At first glance, one of those would seem to be fees. A number of banks are charging small convenience fees for MCD. However, not all banks do, and this is likely to create consumer expectations for no-fee MCD service. Indeed, the data that we are seeing indicates that the institutions that do charge are already seeing a relatively lower level of mobile deposits, compared to institutions that aren’t charging. So, while MCD does offer some revenue potential, MCD fees aren’t likely to be a long-term factor in profitability. A larger and more sustainable impact is likely to come from MCD’s contribution to reduced costs. When consumers make mobile deposits, they aren’t visiting branches and drawing on resources there. Transaction costs for in-branch deposits vary widely, but as a rule, the per-transaction over-the-counter cost for community banks and credit unions is in the $2 to $4 range. MCD could eliminate a significant portion of that. While check volumes are declining, that decline continues to be slow. Banks still need to process a large number of checks – and the savings from MCD could be both substantial and long-term. The actual size of that savings will depend on each specific bank’s situation. However, many institutions do not have a clear understanding of what it actually costs to accept and handle a check in the branch. Developing that understanding will be key to being able to accurately assess continued on page 20 Transaction costs for in-branch deposits vary widely, but as a rule, the per-transaction over-the-counter cost for community banks and credit unions is in the $2 to $4 range. MCD could eliminate a significant portion of that. 18 www.wib.org Western Independent Banker http://www.wib.org

Table of Contents for the Digital Edition of Western Independent Banker - May/June 2013

A Message from the Chair
Data Mining for Profits in 2013
Banks Must Face Their Own Fiscal Cliff
Boost Your Bottom Line with Lending Process Enhancements
Managing Interest Rate Risk to Achieve Strategic Profitability
Moving Mobile Banking Toward Acceptance – and Profitability
Alternative Revenue Strategies to Improve Bank Profitability
Analyzing Customer Performance to Increase Bank Profitability
WIB Service Corporation Report: Secrets to Success in 2013
Professional Development Resources
Welcome New Members
Index of Advertisers/ Advertiser.com

Western Independent Banker - May/June 2013

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