A New Look at
Merchant Remote Deposit Capture
Markets & Markets – Analyst Briefing
Research Analyst – Varun Jain
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RDC – A Time & Cost Saver
Reduces the overall workflow by 30-40%
Eliminates costs associated with conventional process of depositing checks – visiting bank, photocopying of checks, purchasing deposit
slips
Improves cash flow – extended business hours to deposit checks and same day ledger transactions
Opportunity target
segment
After the phenomenal adoption of RDC by FIs, the next opportunity segment is merchant capture.
In 2004, RDC usage by merchant was expected to reach around 16 million by 2012.
Currently, only 7.3 million merchants are expected to be use the product by 2014.
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Merchant Capture: The next opportunity
segment in RDC
24
Opportunity gap
US Business (Millions)
20
16
12
8
Low adoption among large businesses.
Lack of effective solution for small & mid
size businesses.
Effective solutions for small &
mid-size merchants
4
0
2004
Timeline
2012
Expected rate of adoption
Actual rate of adoption
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Key Findings - RDC users to reach about
7.3 million by 2014
•
Among the top 180 commercial banks as per asset size in 2009, 78% offer merchant RDC. All banks with $1 trillion in assets
provide merchant capture whereas only 44% of banks with asset between $5 billion and $10 billion offer RDC.
•
Merchant RDC adoption was low as users feared fraud and operational risks associated with its use.
•
In 2007, only 25,000 of 24 million merchant in U.S. were using RDC. Our research estimates the number of RDC users to reach
about 7.3 million by 2014.
•
Creating awareness is one of the key playing fields in RDC. Banks are bundling RDC with other products and educating
merchants through campaigns and awareness programs.
•
Multiple names for RDC, like ‘electronic check deposit’ and ‘merchant capture’, are confusing merchants.
•
The solutions offered by most of the banks facilitates single account check deposit, whereas businesses demand a product with
multiple account deposit facility.
•
Banks and ISOs can offer products as per the varying needs, such as different scanners with varying features, speed and check
scanning capacity, for businesses with different check volumes.
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Market Dynamics of Merchant RDC
Opportunities
• Huge untapped segment of merchants
• Tailored products for different business segments
Demand Side Drivers
Key Competitive Points
Supply Side Drivers
• Almost all major commercial
& community banks offer
merchant RDC
• ISOs aggressively marketing
merchant RDC
• Enhanced, customized products
• Customer awareness & training
• Reduced operational risk & regulatory
compiled solutions
Restraints
• Depleting check transactions
• Merchant’s unawareness about RDC
• Lack of optimal solution
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• Huge commercial base with over 24
million businesses
• Large number of check transactions
encourage use of RDC
• RDC saves time and cost, improves
cash flow and enhances customer
service
Channels of Merchant RDC
Bank Centric Channel - an
existing channel
Provide the facility of single
account deposits.
Merchant
Merchant RDC
Merchant
Bank A/C 1
Merchant
Merchant RDC
Merchant
Bank A/C
- 2
Merchant
Bank A/C
-3
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Merchant Bank
A/C - 1
Bank Agnostic Channel – an
upcoming channel
Independent Sales Organizations
(ISO) provide the facility of multiple
account deposits using merchant
RDC.
Pros & Cons of RDC channels
Bank Centric
ChannelAdvantages
Higher margins as
no third party involved
Confirmed retention of
deposits
Bank
Agnostic
Channel Advantages
Multiple account
deposit facility for
opportunity segment –
as small and micro
businesses
Small and micro
businesses are
secondary target for
banks but primary for
ISOs
Service culture of bank helps retaining customers
ISOs have sales
culture – proactive
sales and focused
product approach
Bank
Centric
Channel
Disadva
ntages
Doesn't provide
multi-account
facility
Banks are weak
marketers
Bank
Agnostic
Channel Disadvan
tages
Integration of ISOs
increase the cost of
services for banks
Not very good at handling and installing equipment for
customers
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ISOs command
expertise in training and
installation of product
RDC not beneficial
as credit card
terminal – cost of
scanning check is
pennies when
compared to cards
having basis point
ongoing revenue
Hybrid Model - realized but yet to be
utilized
Bank
1
Bank
2
Merchant
Makes Multiaccount deposits
Bank (RDC Provider)
Bank act as third party
processor/ presentment
bank for multi-account
deposits
Bank
3
nBanks
Benefits of Hybrid Model
Multiple account deposit facility
• Visibility of customer ‘s cash flows will lead to new cross sell opportunities
• Elimination of ISOs leading to cost effective solutions
•
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Value Proposition of RDC for Merchants
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M&M Contact Details
For queries on A New Look at Merchant remote Deposit Capture
For Analyst Briefing - Please contact the analyst on varun@marketsandmarkets.com
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