Mobile Remote Deposit Capture:

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1 Mobile Remote Deposit Capture: Driving Profitability and Customer Retention Presenters: Mary Monahan, EVP/Research Director, Javelin Patrice Peyret, CEO, Plastyc Mobile Banking and Commerce Summit: June

2 Mobile Remote Deposit Capture: Overview The mobile deposit rush is on. The strong consumer desire for mobile deposit. The ROI of mobile deposit. Banker perceptions that inhibit mobile deposit. Strategies for the underbanked and prepaid Javelin Strategy & Research 2

3 Mobile Deposit is an Acquisition Strategy 3

4 Key Message One in five mobile bankers uses mobile remote deposit capture Javelin Strategy & Research 4

5 The Mobile Goal: Bring ipod-like Simplicity to Mobile Banking 2012 Javelin Strategy & Research 5

6 Show Consumers Why Mobile Banking is Practical and Can Make Them Safer Top 3 Reasons Consumers Do Not Use Mobile Banking I don't see the value of mobile banking Security of mobile banking The cost of data access on my wireless plan Q6: Security of mobile banking - You indicated you do not use mobile banking. For what reasons do you not use mobile banking? (select up to three) 0% 10% 20% 30% 40% 50% Percent of Consumers March 2010, n = 2,373 Base: All consumers with mobile devices Javelin Strategy & Research 2012 Javelin Strategy & Research 6

7 Move Aggressively from View to Do -- and Sprinkle in Some Wow Mobile Banking Functionality Offered at Leading U.S. FIs 2012 Javelin Strategy & Research

8 The Mobile Deposit Rush is On! Key FIs Offering Mobile Deposit USAA Chase US Bank Citi PNC Bank PayPal Charles Schwab West Virginia FCU 8

9 Chase Redefines Mobile Banking (and Romantic Things to Do on a Honeymoon) Chase TV Ad: Newlyweds Deposit Wedding Checks 9

10 1 in 4 Consumers Wants Mobile Deposit Consumer Desire for Mobile Deposit (by FI size) Large Financial Institutions (over $750MM) Mid-sized financial institutions ($30MM-$750MM) Small Financial Institutions (Under $30MM) All Consumers Desirable or very desirable Q41. Q42. Banks or credit unions can offer a service that enables customers to deposit a check by photographing it with the camera on their mobile phone, then sending the image to the bank through a mobile-banking application. How desirable is this service to you? 0% 10% 20% 30% 40% March 2011, n= 1,880, 1,183, 1,818, 4,267 Base: All consumers with mobile phone who bank at large FIs; All consumers with a mobile phone who bank at mid-sized FIs; All consumers with a mobile phone who bank at small FIs; All consumers with a mobile phone Javelin Strategy & Research 10

11 Target Key Segments First Desire for Mobile Remote Deposit by Key Segments Mobile bankers iphone users More than $150,000 Small business owners 18 to 24 All consumers 0% 20% 40% 60% 80% 100% Very desirable Not desirable at all 1 Q42: Banks or credit unions can offer a service that enables customers to deposit a check by photographing it with the camera on their mobile phone, then sending the image to the bank through a mobile-banking application. How desirable is this service to you? March 2011, n = 4,267, 345, 257, 471, 462, 749 Base: All consumers, all consumers age 18 to 24, all consumer who are small business owners, all consumers who have an income of $150,000 or more, all consumers with an iphone, all consumers who are mobile bankers Javelin Strategy & Research 11

12 Banker Survey 12

13 More Than Half of Surveyed FIs Plan to Offer Mobile Deposit in the Next Year Time Frame When Financial Institutions Plan on Offering Mobile RDC Within the next three months In 3-6 months In 7-12 months We plan to offer, but are not sure when Q1: When does your financial institution plan to offer mobile remote deposit capture? 0% 10% 20% 30% 40% 50% Percent of financial institutions surveyed April 2011, n=19 Base: All financial institutions which do not offer mobile remote deposit capture Javelin Strategy & Research 13

14 Everybody Wants to Offer iphone, Android Capabilities Operating Systems That FIs Plan to Implement Android iphone Blackberry Windows Other Unsure 0% 20% 40% 60% 80% 100% Q2: Which of the following mobile operating systems does your financial institution plan to support? Percent of financial institutions surveyed April 2011, n=9 Note: Low n size bu trends may be drawn Base: All financial insitutions that plan to offer mobile remote deposit capture in the next 12 months Javelin Strategy & Research 2012 Javelin Strategy & Research 14

15 1 of 3 Bankers Worries About Security of Mobile Deposit Security Concerns Associated with Mobile Deposit 15

16 The ROI of Mobile Deposit 16

17 Lower Processing Costs Enhance ROI Traditional vs. Mobile Costs 2012 Javelin Strategy & Research 17

18 Branch and ATM Visits Should Decline After Implementation Banking Activities (by Those Who Desire Mobile Deposit) Logged into the website for online banking Transferred funds online between your own accounts at your primary bank to another institution Received a financial alert by (i.e. low- balance alert) Conducted mobile banking Received a financial alert by text message (SMS) Logged into an online banking session to transfer funds to another individual Transferred funds online using a wire transfer Used a mobile phone to transfer funds to another individual Transferred funds online using a wire transfer through a money service business (such as Western Union) Desire mobile deposit All consumers with financial products who own a phone 0% 20% 40% 60% 80% 100% Q42: Banks or credit unions can offer a service that enables customers to deposit a check by photographing it with the camera on their mobile phone, then sending the image to the bank through a mobile-banking application. How desirable is this service to you? "Very desirable" and "desirable" only, other options apply. Q18.or19 Please indicate the last time you conducted each of the following financial activities with your primary bank. Percent of consumers March 2011, n= 4266, 1010 Base: All consumers with financial products that own a phone., all consumers with financial products that own a phone likely to use mobile remote deposit capture Javelin Strategy & Research 18

19 MRDC Strategies for the Underbanked: Leveraging Prepaid Cards Co-Presenter Patrice Peyret, CEO, Plastyc 19

20 Mobile RDC for Underbanked Opportunity to save time and money for 60M people in the US 60M underbanked in the US (source: FDIC) Have to go to check-cashing stores: Waste of time: going to the store twice a month Waste of money: high fees (except for certain printed checks) Higher penetration of smartphones among under-banked Click than to edit the Master US average title style People with no fixed phone line and ISP at home Their mobile phone is main online access and mission-critical 20

21 The Last Remaining Gap between Prepaid Cards and Checking Accounts Mobile RDC coupled to Prepaid Cards = Checking Account General Purpose Reloadable prepaid cards are all ACH-routable i.e. look like checking for bank transfers most with FDIC insurance many with Reg E compliance (for cards able to receive tax refunds and other government funds) many with Click bill to pay edit services Master title including style paper checks 21

22 Check Depositing is the Last Stop Mobile RDC coupled to Prepaid Cards = Checking Account They are only missing check depositing to be 100% functionally equivalent to a checking account = 22

23 Remaining Challenges for MRDC + Prepaid Cards Security requirements are more stringent than with regular checking accounts Customers more tempted to cheat Photoshop a check, cash it, empty the card, disappear Cash a large valid check twice: Through MRDC into a prepaid card At a check cashing store immediately afterwards and go underground Customers less vetted: availability of MRDC will be a prime motivator to open a prepaid card account 23

24 When/How to Expect MRDC for Underbanked Early 2013 should see a number of MRDC-prepaid offerings for the underbanked Major prepaid issuing banks are currently vetting anti-fraud measures Anti-fraud measures will include Geo-restrictions Velocity and amount limits Dissuasion through random phone calls during check capture MRDC for underbanked consumers with prepaid cards will likely deploy progressively via pilot tests 24

25 Key Takeaways 25

26 Key Takeaways Mobile deposit is an acquisition strategy but not for long. It can create revenue opportunities and cut costs. Integrated, targeted rollouts will have stronger appeal. Mobile deposit and prepaid can build a bridge to the underbanked. Educate consumers and build fraud mitigation tools into the solution. 26

27 Mobile Remote Deposit Capture Thank You Javelin Strategy & Research provides strategic insights into customer transactions, increasing sustainable profits for financial institutions, government, payments companies, merchants and other technology providers. For questions regarding access to Javelin research please contact: 2012 Javelin Strategy & Research. All rights reserved. This data was provided to accompany a report which was licensed for use by the original subscribing client only. The data and report is protected by copyright and other intellectual property laws. Licensors may display or print the content for their use only, and may not sell, publish, distribute, re-transmit or otherwise provide access to the content of this report without permission. 27