Remote Deposit Capture (RDC) is an easy three-step process of scanning, verifying, and depositing a check. It has emerged as one of the best solutions to help merchants reduce the time and cost associated with the manual check deposit process. RDC has become a necessity because paper checks still form one of the most popular methods of payment, currently accounting for around 75% of initial B2B payments. The solution’s benefits have induced almost every bank to incorporate it in order to acquire new customers as well as to retain existing ones. 

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RDC growth from 2004 to 2008 has been an impressive 70% per year. The initial adoption was among the banks and financial institutions as branch deposit capture. This was followed by the adoption of the bank’s commercial base wherein the major targeted segment was big businesses where banks held their core deposit and asset base.

As banks turned their focus to merchants, they targeted small and medium size businesses with annual revenue of $1 million to $25 million. While RDC adoption by this market segment lagged behind expectations at an estimated 2% in 2007, this segment of the market is beginning to see value in the solution and adoption is on the upswing, currently around 30%. The big unknown, the micro business segments with annual revenue of $25,000 to $1 million, represents 70% of all printed checks, and promises to be an attractive market if banks can learn how to crack it.

RDC solutions are currently sold through two channels. In the direct sales channel, banks directly sell the solution to merchants, whereas in the third-party channel, solution providers such as Profitstars, Fiserv, Netdeposit act as interface between merchants and banks.

The currently low adoption rate of RDC has created an opportunity gap in the market. The opportunity gap also arises from the inefficient channel of marketing RDC, the failure to deploy scanners to the end-users, and the lack of consumer training and awareness.

As most banks have realized that one size does not fit all, coming up with solution for businesses or merchants with low volume checks or low deposit amounts can create a niche segment for RDC adoption. Thus, innovative product offerings by banks will play a major role in the development of the RDC market. Moreover, the integration of industry participants, i.e., banks, scanner manufacturers, and application service providers, will help all market players provide more effective and cost-saving solutions.

The objective of the report is to provide the most effective channel and message, the target market, and provide an insight into the decision making process. Our report, A New Look at Merchant Remote Deposit Capture, Getting Merchants to Use the Service, will help Financial Institutions gain a better understanding of what they can do now to increase RDC penetration.

Key Findings

• Among the top 180 commercial banks as per asset size in 2009, 78% offer merchant RDC. All banks with asset size of more than $1 trillion provide merchant capture whereas only 44% of the banks with an asset size between $5 billion and $10 billion offer RDC.
• Merchant RDC adoption among businesses has not been high as users were typically non-bankers and feared fraud and operational risks associated with the use of the solution.
• Merchant RDC integrated with the account receivables facility solution reduces the work of statement reconciliation, resulting in overall workflow reduction by 30%-40%.
• In 2007, only 25,000 U.S. merchants of an estimated 24 million were using RDC. Our research suggests that the number of RDC users is expected to reach around 7.3 million by 2014.
• Of the 24 million businesses in the U.S. in 2007, around 16-17 million are potential RDC users.
• Creating awareness is one of the key playing fields in RDC. Banks are formulating various strategies to increase awareness of the product by bundling it with other products and by educating merchants through various campaigns and awareness programs.
• Too many names for RDC, such as ‘electronic check deposit’ and ‘merchant capture’ are confusing merchants; it is better to use just one name to market the service in the industry.
• Most of the solutions offered by banks have a facility to deposit checks in one account; however businesses require products with multiple account deposit facilities. Offering RDC with multiple account deposit facility will help increase the adoption of RDC.
• Banks and ISOs can offer products as per the varying needs of different businesses, such as different scanners with varying features, speed and number of checks scanned per day for businesses with different check volumes.
• The research has suggested a new form of channel for merchant RDC i.e. Hybrid channel which is an enhanced version of bank centric channel.

Scope of the report

• Strategy Formulation – Market definition, industry overview, market size, key drivers, and issues related to the adoption of the remote deposit capture among merchants
• Business Models – Live business case studies on go-to-market strategies, and on challenges during RDC deployment
• Vendor Analysis – Vendor profiling, vendor benchmarking and analysis

About MarketsandMarkets
MarketsandMarkets (M&M) is a global market research and consulting company based in the U.S. We publish strategic advisory reports and serve as a business intelligence partner to Fortune 500 companies across the world. MarketsandMarkets also provides multi-client reports, company profiles, databases, and custom research services.

M&M Banking and Financial Services practice recognizes the challenges that financial institutions face bringing the right products to market. Our reports and consulting practice provide a unique perspective allowing the financial institution to see and experience the best way to achieve their product goals. Through a mix of case studies, primary research, and business modeling we provide a 360° view to identify how you can create, capture, and keep the value of your product and out think the competition.

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