ALPHARETTA, Ga.–A new study suggests fears held by financial institutions over the risk associated with remote deposit capture are overblown. At the same time, one analyst said small businesses are where the next RDC battle will take place.
“When asked to rank various payment types in terms of riskiness, the 322 banks and credit unions participating in the study placed mobile deposits fairly high – just after debit and credit cards,” said RemoteDepositCapture.com of its second annual mRDC Indstry Study. “But a deep dive into the survey results indicates that risk fears do not match up with what is really going on.”
The study included 255 banks and 67 credit unions.
“Despite perceptions of risk, 92% of FIs surveyed said they felt the benefits of mRDC outweigh the costs and risks; 53% said the benefits far outweigh the costs and risks,” said RemoteDepositCapture.com in its analysis of the findings. “Among those financial institutions that actually offer mRDC the comfort level with mRDC is even more apparent: over 95% said the benefits exceeded the costs and risks; 61% said far exceeded.”
An overwhelming majority of FIs participating in this year’s survey (76%) had not experienced any losses from mRDC. The actual number probably is higher though, said RemoteDepositCapture.com.
The only losses that can be directly attributed to RDC are those arising from duplicate deposits, according to “John Leekley, founder and CEO of RemoteDepositCapture.com.
Other trends, such as kiting, that involve the mobile deposit channel are sometimes mis-categorized as mobile deposit frauds. “We suspect several respondents over-reported actual losses,” Leekley said.
In fact, analysis of the survey data suggests FI losses due to duplicate deposits are substantially lower than overall check fraud losses, according to the company. That analysis produced a Duplicate Loss Rate of 0.0104%, or 1.04 out of every 10,000 items deposited.
Put In Perspective
“To put this into perspective, the Federal Reserve reports a Return Item Rate for all checks processed through the Fed System of 0.3% or 30 out of every 10,000,” the company said. “Of those FIs that reported losses, 47% said the amounts were so small that they did not require changes in policies or procedures. And just about every FI surveyed this year has plans to expand mobile deposit offerings.
Nevertheless, RemoteDepositCapture.com urged FIs to take steps to limit mRDC risks. Eighty-nine percent use deposit value limits, for example. And just over 60% tailor mobile deposit limits by segment, customer risk score or some other rule, such as account type or deposit size.
“The technology has improved to such a point that you can customize the default offering for all customers,” Leekley said.
Looking forward, Leekley said he expects small business to become a hotbed of mRDC activity. Among surveyed FIs that are new to mRDC, 78% say they plan to offer it to small businesses. The more complicated nature of small business payments makes it ripe for value-added data offerings, which should generate more innovative approaches to pricing.
“Small business is where the war is going to be waged over the next few years,” Leekley said.