Business clients of 1st National Bank of Arizona can now make deposits without leaving their desks, or paying for the hardware.
The largest privately held, family-owned bank in the Southwest is deploying Image Deposit, a service that uses a secure high-speed Internet connection and a small desktop scanner to electronically deposit checks, saving customers trips to the bank and offering faster access to funds. It's also offering the service without charging for the hardware, believing that will goose growth in check income even more. "We are looking to get new relationships on the deposit side," says Mike Shellenberger, svp and director of treasury management for the bank, which has $3.7 billion in assets.
The service is from NetDeposit, and works via an image-deposit scanner. The scanner makes a digital image of both sides of each check, electronically crediting deposits to the customer's account, and then digitally archiving checks for future reference. And since the checks are being deposited in a centralized location, only one bank is needed for all deposits-even if a business has a number of locations that may be outside of the bank's normal footprint. "Businesses don't have to worry about missing deposits at certain locations because they've missed the window," says Rahn Rampton, a marketing official for NetDeposit. "The end users can solidify their banking relationships."
The Scottsdale, AZ-based bank's footprint includes Arizona, Nevada and parts of southern California. It's a commercial lender in its core markets, and offers mortgages nationwide. Competition is coming from big banks with a greater brick and mortar presence.
That's making image capture a natural fit for an institution looking to make major inroads in commercial banking, particularly among smaller businesses with between $500,000 and $6 million in yearly sales.
As remote deposits are emerging as a favored way for institutions to lure new corporate customers and small business clients, 1st National isn't alone. The technology offers the ability to do banking transactions over the Internet-saving time and travel for the client, enabling faster access to funds, extending the processing day and incorporating improved security-all while saving infrastructure expenses. Some banks are using remote deposits as a canary-in-the-mine approach to test the viability of establishing new branches.
The technology has won a major supporter in 1st National CEO, Gary Dorris, who has compared remote deposits to the effect ATMs has had on personal banking. The bank is bullish on the future of the new practice, with Shellenberger saying the goal for the new service is to generate 100 new business relationships each month.
Its efforts include a sales staff dedicated to outbound marketing to customers and break-in fees for prospective business clients. The bank is charging a fee of $39 per month and a one time set-up/training charge of $150. The bank retains ownership of the hardware, meaning it's not charging business clients for the scanner and any other equipment. "We want deposits to drive profitability and we have chosen to differentiate ourselves in terms of pricing," Shellenberger says.
Shellenberger says the hardware, such as a scanner and other related equipment, can typically cost from $1,500 to as much as $4,000, depending on customer needs. That's a lot for a small business, and certainly more than $150 plus $39 per month. He says that with the bank's goal of 100 new relationships each month with retention of at least a three-year span, the deposits "would far outstrip" the charge for the hardware.
It's too early to know if that strategy will pay off for 1st National, but a similar strategy did pay major dividends for Bank of America in terms of consumer payments. The bank offered free Internet bill pay when most other banks were charging for the service, and the result was BofA becoming the dominant player in the Internet payments market, even as other institutions followed suit.
Rampton says his company's bank clients make decisions on charging for hardware on their own. He didn't endorse a specific approach to the hardware expense issue, nor would he break down his client base in terms of which banks were charging or offering the equipment for fee. "The scanners aren't cheap off the shelf, and a lot of banks are finding ways to see that the small business owner doesn't have to cough up a check," he says. "They are doing analysis of their relationships to find ways to advance credit for the hardware, or they're charging for it on a monthly basis."
He also said the market for business remote-check deposit is still in its early stages, and a single standard hasn't developed. "Every bank is trying to do whatever they can," he says.
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