Manifest Destiny: Small Business Remote Deposit Capture

by Bob Meara, March 4, 2008


Checks are central to small business finances and will remain so for the foreseeable future. However, meaningful adoption of RDC solutions by small businesses is inevitable. Highly predictable market forces will produce escalating competition as more deployers enter the market, driving down solution costs and spurring adoption.

Like the US North American expansion in the nineteenth century, remote deposit capture (RDC) is rapidly gaining territory. But just how far and how fast will it expand? In a new report, , based on three separate quantitative surveys, Celent concludes that broad-based adoption by small and micro businesses (SMBs) is indeed the manifest destiny for RDC, and will come about in large measure over the next three years. Banks with large branch footprints have long had a stranglehold on small business financial services. For those willing to think and act differently, remote deposit capture will change that.

Although as many as 60% of US financial institutions have remote deposit solutions, two-thirds offer the same product to large and small businesses alike. But 30% of retail banks are planning separate remote deposit initiatives aimed specifically at small businesses. Historically, such initiatives have been rare, due to high solution cost and back office infrastructures that weren't ready to efficiently process incoming check images. This trend should continue as a number of factors align to foster significant small business adoption through simultaneously improving client demand and eroding historic financial institution barriers.

“Two things jump out of this research,” says Bob Meara, author of the report and senior analyst with Celent's Banking group. “The first is just how important checks are to small businesses. In our survey, checks represent 75% or more of total receivables for over two-thirds of small businesses. Second is the terrific opportunity for remote deposit among the smallest businesses, 20 million of them with annual revenues of less than US$1 million. Banks haven't focused there yet, but new, low-cost scanners coupled with thin client applications will open up a whole new market for banks.”

This report begins by suggesting the manifest opportunity small business RDC represents as a vehicle for low cost deposit growth, particularly given today's challenging lending and interest rate picture. The report also presents an overview of the small business landscape, highlighting the significant opportunity among businesses with revenues of less than US$1 million.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary 04
Introduction 07
  How Small Is Small? 09
  The Coming Competition 10
The Centrality of Checks Among SMBs 14
  The Broader Small Business Payments Picture 19
Sizing the Opportunity 22
  Proxies for RDC Adoption 23
  Small Business Adoption Forecast 26
Seizing the Opportunity 30
  Getting the Positioning Right 31
  Getting the Solution Right 34
  Reaching Micro Businesses 38
Conclusions 41
Appendix: Survey Demographics 42


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