Portals & Rails

October 14, 2014

Mobile Biometrics: Ready or Not, Here They Come

Apple's recent announcement about the release of its mobile wallet app—called Apple Pay—energized the mobile payments community. One reason for the spike of interest is Apple Pay's use of fingerprint biometrics as an additional layer of security in validating customers and their transactions. What may have gotten a little a little lost in the chatter that followed this announcement was another, related announcement. As reported in a September 19 FinExtra story, MasterCard (MC) announced it had completed a pilot project that used a combination of facial and voice recognition on a smartphone. MC said that the trial program—which involved MC employees around the globe conducting 14,000 transactions—had a successful validation rate of 98 percent.

The Apple and MC announcements together certainly show that the future of the additional security options on smartphones looks promising. As a recent post noted, consumer research has consistently found that consumers' largest concern about using mobile phones for financial transactions is security. But are biometric technologies ready for prime time? Will their application in the payments ecosystem really give payment providers more confidence that the person they are dealing with is not an imposter?

The latest generations of Apple and Android smartphones are equipped with fingerprint scanners, cameras, and microphones, which allow for the use of fingerprint, voice, and facial recognition. But limitations exist for each of the techniques. The Apple and Android fingerprint readers, for example, were compromised within days of their initial release. And facial and voice recognition applications work best in controlled conditions of lighting and with limited background noise—an unlikely environment for a smartphone user on the go.

But security experts agree that additional customer authentication methodologies—beyond the common user ID and password entry fields—increase the overall authenticity of transactions. Numerous companies are continuing to focus their research and development efforts on improving the reliability and use of their authentication products. So while there is no "one size fits all" authentication solution over the weak and easily compromised ID-and-password method, these biometric methods represent a step forward, and are likely to improve over time.

The Retail Payments Risk Forum is taking a close look at biometrics technology and its impact on the payments system. We are working on a paper assessing biometrics and authentication methodologies that will probably be released by the end of the year. We're planning a forum to be held this upcoming spring on mobile authentication technologies. And we're continuing to write posts on the topic in Portals and Rails.

Please feel free to contact us with your suggestions on biometric issues you would like to see us address in our continuing efforts.

Lott_david_01 By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

 

October 14, 2014 in authentication, biometrics, innovation, mobile banking | Permalink

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October 06, 2014

Starting Off on the Right Note with Mobile Enrollment

In Rogers and Hammerstein’s Sound of Music, the classic song “Do-Re-Mi” begins “Let's start at the very beginning / A very good place to start...” Such a suggestion is essential in ensuring that the person enrolling in a payments system is, in fact, who he or she claims to be. The USA Patriot Act requires financial institutions (FIs) to develop a formal customer identification program that validates the customer when the account is opened. This program must specify the documentation that is used for authentication.

However, once the account is open, FIs have greater latitude in their procedures for identifying customers when the FIs handle account access requests, such as when a customer requests a change of address or enrolls in a third-party program that uses a card that the FI has issued to the customer. At that stage, it’s up to an FI’s own risk-management policies as to what documentation to require.

This situation can be risky. For example, let’s look at what happens when a customer wants to add a payment card to a mobile wallet that a third party operates. When the customer adds the card—enrolls with the third party—how can the FI that issued the card know that not only the payment card being added but also the mobile phone itself belongs to the right individual? How can the issuer efficiently and effectively ensure that the payment card information being loaded on a phone hasn’t been stolen? Adding any sort of verification process increases the friction of the experience and can result in the legitimate user abandoning the process.

Most mobile wallet operators use several techniques to validate that both the mobile phone with the wallet and the payment card belong to the rightful customer. (These operators send a request to the issuing FI as part of their enrollment process.) Some FIs require the operator to have customers submit their payment card information along with their cards’ security code and additional data, such as the last four digits of the social security number. Others may require just the payment card number, expiration date, and card security code, although such a minimal requirement offers little protection against a stolen card being added to a criminal’s phone. Still others require the customer to submit a photo of the payment card taken with their phone to verify possession of the card. If the issuer can obtain some of the phone’s device information, it can increase the level of confidence that the authorized cardholder is using their phone.

Regardless of what process is used, having strong identification controls during the initial enrollment step is essential to a sound risk management program.

Photo of Douglas A. King

By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

October 6, 2014 in authentication, financial services, mobile banking, mobile payments, payments systems | Permalink

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July 28, 2014

Where's the Mobile Payment?

I was a big fan of the '80s Wendy's commercials that featured an older woman uttering the phrase, "Where's the beef?" I recently found myself muttering something similar to myself: "Where's the mobile payment?" In early July, I came across the American Banker website headline "Six Fintech Startups That Wowed Bankers." The article highlighted six tech startups that recently pitched their financial products and services to executives from 15 of the largest banks at a one-day event. I was expecting to read about several mobile payment or mobile wallet startups, but surprisingly, none were mentioned.

According to the article's author, for a fintech startup to capture a banking executive's attention, it must address a need in the marketplace that few others are meeting. Could it be that the executives don't view mobile proximity payments as a customer need? I recently blogged about mobile payments fatigue and received some mixed feedback—but I heard little from our banking community readers. From a mobile payments perspective, they are extremely active in both person-to-person and bill payment initiatives. But outside of a few limited pilot programs, financial institutions have made little noise regarding mobile proximity payments or mobile wallets.

Given the prominent role financial institutions are playing in mobile payments through person-to-person and bill payments, why aren't they actively participating in proximity payments at retailers? Are they failing to meet the needs of their customers? According to the J.D. Power 2014 Retail Banking Study, customer satisfaction with banks is at an all-time high. And though the study found that some banks are falling short of meeting their customers' needs, the large banks covered in the survey experienced a significant rise in customer satisfaction scores, leading me to believe these banks are doing as good of a job as ever in listening to their customers and fulfilling their needs.

Is it possible that there isn't currently a driving consumer need for banks to deliver a mobile proximity payment or mobile wallet solution? My colleague Dave Lott suggested earlier this year that for mobile adoption to take place, the experience needs to follow Andy Grove's 10x rule and be 10 times better than what consumers are used to. What do you think it will take to catch the eyes of banking executives in the mobile proximity payments space?

Photo of Douglas A. KingBy Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

July 28, 2014 in innovation, mobile banking | Permalink

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March 03, 2014

An Efficient Mobile P2P Payment: The Paper Check

Having had the chance to spend some time reviewing the 2013 Federal Reserve Payments Study, I was struck by the lasting power of the check in the consumer-to-consumer (or P2P) space. Although overall check usage has declined (checks written by businesses and by consumers to businesses have all declined significantly), check usage in the P2P space increased between 2006 and 2009 and was stable from 2009 to 2012. And this has occurred when the number of bank and nonbank mobile P2P payment solutions that have entered the marketplace or matured during the past few years.

As a parent of two young children, I have acquired ample experience in the P2P payments space—that is, in paying babysitters. As a self-proclaimed payments geek, I am always interested in learning how the babysitter prefers to be paid. Cash remains king with most, at least the high school-aged ones. We have one college-aged sitter who likes being paid through a nonbank P2P payment provider. And most recently, another college-aged sitter wanted to be paid by check, which really caught me off guard. She informed me that she uses her mobile banking app to process her checks through mobile remote deposit capture (RDC) and that she prefers having access to the funds through her debit card over cash. The amazing thing that has struck me from these weekly transactions is the efficiency of this P2P payment transaction.

If the babysitter makes the mobile deposit before 9 p.m. (ET), she has access to the funds the following day. If after 9 p.m. , the funds are available to her in two days. On my end, the transaction appears in my banking activity the morning following the deposit. Talk about efficient—fast and inexpensive (no fees paid by either of us)!

Obviously, the efficiency of this transaction would have been diminished were this not a face-to-face transaction. And maybe that is where the true value of online or mobile P2P payments comes into play. However, the resilient check and mobile RDC banking application worked really well in this face-to-face setting. According to a recent report, mobile RDC was offered by approximately 20 percent of U.S. banks in 2013, up from 7 percent at the end of 2012. As more financial institutions roll out the offering in the upcoming year, maybe it will be the case that the old paper check is here to stay and will flourish in the P2P payments space. And based on my experience, that might not be a bad thing!

Douglas A. KingBy Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

March 3, 2014 in checks, mobile banking, mobile payments, payments study | Permalink

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July 15, 2013

In Memory of a Beloved Colleague: Protecting Your Bank Account

This repost of a blog post, originally published on April 8, 2013, is in memory of our beloved colleague and friend, Michelle Castell. Michelle died earlier this month after a long and courageous battle against cancer. The blog summarizes a white paper Michelle wrote earlier this year concerning online account takeovers, a topic that is still timely. Michelle was new to the world of payments when she joined the Retail Payments Risk Forum in mid-2012. In her enthusiasm to learn about payments, she experimented with different payment types and channels to gain a personal understanding of how they work and the risks they pose. Michelle was immediately intrigued and concerned by the account takeover risks posed to consumers and businesses from the alarming growth of malware on mobile phones. It was through her personal and enthusiastic approach to her work that Michelle became an advocate for improved consumer education when it comes to payments security—which is the conclusion of this post and her account takeover white paper. You can find a link to the white paper at the end of the post.

Today's news is loaded with stories of account takeovers of both businesses and individuals. With an alarming frequency, accounts are hacked, identities are stolen, and money disappears. Have the availability of smartphones and their increased use for conducting social, financial, and personal business sparked this increase? With a 78 percent penetration rate in the United States alone, mobile phones are not going away, and smartphone growth is catching up.

Currently, there are 6 billion mobile subscribers worldwide, with more than 1.2 billion of them accessing the web at any given time. These individuals are shopping, banking, watching videos, playing interactive games with other players, texting, or e-mailing on their devices. Smartphone users are actually three times more likely to provide their log-in information when prompted than those accessing the Internet from a personal computer, according to the computer and network security company RSA. Given these trends, fraudsters are once again taking advantage of the weak spot and using technology to spread malware onto mobile phones.

Less than 50% of Mobile Consumers Find Many Dangerous Behaviors to be Risky

While the number of individuals accessing the web is staggering, perhaps even more amazing is the increased usage of mobile devices for sending text messages. In 2011 alone, more than eight trillion text messages were sent. As such, text messaging fraud—or “smishing,” a term created from the abbreviation for short message service SMS—is now becoming a tool of choice for fraudsters.

Is your phone protected? Studies conducted in the United States and abroad show that only 4 to 10 percent of all phones have antivirus software, compared to over 80 percent for personal computers. It's just as easy for a cybercriminal to gain access to your financial institution through a mobile text or a mobile e-mail account as it would be on a computer. Could protection and education about mobile security be the ticket to reducing account takeovers? I believe it can. Taking a bite out of that 90-percent statistic for unprotected smartphones most certainly will deflect attacks that could penetrate through to the financial environment. T-Mobile recently announced it was teaming up with Lookout virus protection to begin shipping most Android models with out-of-the-box protection against malware and viruses. This move could be a significant first step in virus protection, especially if other phone manufactures were to follow suit.

What can you do? Well, there are a few things, including:

  • Install a certified virus application on all family devices and set them to run weekly (many good options are free).
  • Don't change the default security restrictions by jail breaking your device. Only download applications from a reputable vendor application marketplace (Google Play store or iTunes, for example).
  • Review and make sure you understand any pop-ups, e-mails, or texts before you click.

For more information related to account takeovers, check out the Risk Forum's recent survey paper, "Mitigating Online Account Takeovers: The Case for Education."

Michelle CastellBy Michelle Castell, senior payments risk analyst in the Retail Payments Risk Forum at the Atlanta Fed

July 15, 2013 in cybercrime, identity theft, mobile banking | Permalink

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July 01, 2013

The Cost of "Free"

Many retail-centric banks have found themselves in a fee-revenue dilemma as the impact of regulations regarding overdraft fees and debit card interchange revenue begins to be felt. After decades of providing "free" services to consumers, these banks are under significant customer pressure to continue this practice even as they roll out new products and services. But this pricing model poses financial risk. The operating expenses of the bank are increasing at the same time that the banks are receiving minimal—if any—incremental revenue.

I recently participated in a conference that had a session comprised of a panel of four MBA students. The goal of the session was for the audience of bankers to better understand the driving forces for financial service decisions by the Gen Y, or millennial, customer. (I wrote a bit about this panel in a previous post.) One eye-opening statement universally shared by the panel was the expectation that mobile banking and mobile banking services be provided free of charge. When asked for a justification, they believe that by using the mobile channel they "saved" the bank money over writing a check or going into a branch office. When further questioned as to how the bank was going to pay for the development and operating expenses of such new products and services, their response was essentially that they believe the bank earns sufficient revenue from its lending operations, including credit cards and installment and mortgage loans. I am sure that many other consumer segment groups have this attitude as well.

After Regulation II capped debit card interchange fees for banks with assets exceeding $10 billion, some banks announced they would begin charging a monthly debit card fee. Consumer and media response was so negative that banks withdrew the proposed fee changes. Subsequently, many banks changed their checking account service fee waiver conditions by raising minimum balance requirements, requiring other account relationships (to provide additional revenue support), or eliminating some previously bundled services. The Bankrate 2012 Checking Survey found that only 39 percent of banks were offering free checking without a minimum balance requirement or maintenance fee. This percentage is down from 45 percent in 2011 and 76 percent in 2009. Credit unions have not followed suit—the number of them offering free checking is holding fairly steady at around 72 percent.

Is there anything banks can do to shift consumers' expectations and ease some of the financial risk associated with controlling operating expense levels? We would like to hear from you.

Photo of David LottBy David Lott, a retail payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

July 1, 2013 in financial services, mobile banking, regulations | Permalink

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May 13, 2013

Which Is Riskier, Change or Avoiding It?

There is no denying that any level of change brings with it some level of risk. However, sometimes avoiding change can result in even greater risk. That is the quandary many retail banks find themselves in today as they grapple with the issues of mobile banking and payments and their role in the bank's overall delivery-channel strategy. Sustainability and regeneration are principles normally associated with the community development and environmental arenas, but they can be easily applied to the banking industry and its consumer delivery channels.

Numerous research studies document a large gap in banking attitudes and product or channel usage between the Gen Y or millennial customers and the older customer segments (those who are over 35, if you consider that old). (The Retail Payments Risk Forum discussed some of this research in a paper posted on our website in April.) Younger customers have less loyalty to bank brand, readily adopt new technology, are highly influenced by advertising and peers, expect free or low-cost banking products and services, and are driven by convenience. While they do have a higher overall trust level of banks compared to nonbanks, the gap is not anywhere near as large as that of the older customer segment. The younger segments have eagerly adopted online and mobile banking and are viewed as the early adopters of mobile payments. In fact, when they select a financial institution, the quality and expansiveness of the mobile banking offering is a major factor in their decision.

So what does this changing landscape have for the future of the traditional brick-and-mortar-branch delivery channel? For some time, banks have tried to establish branches primarily as sales centers while moving basic service transactions to alternative automated, less-expensive delivery channels. This effort will continue, but banks must also regenerate their overall delivery-channel strategy to provide sales and service capabilities through virtual channels in order to attract and retain the growing Gen Y customer segment. This regeneration and sustainability effort involves the "right sizing" of each channel to provide their existing and future customers with the appropriate level of services and features as well as capacity to meet service quality goals. Not only will this effort require risk assessments to be continually made for each delivery channel, but also to develop a holistic risk assessment of each customer across all delivery channels.

Let us know what changes, if any, you are making in your overall delivery-channel strategy to address the changing demographics of existing and potential bank customers.

David LottBy David Lott, a retail payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

May 13, 2013 in mobile banking, mobile payments | Permalink

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April 08, 2013

Can These Three Steps Protect Your Bank Account?

Today's news is loaded with stories of account takeovers of both businesses and individuals. With an alarming frequency, accounts are hacked, identities are stolen, and money disappears. Have the availability of smartphones and their increased use for conducting social, financial, and personal business sparked this increase? With a 78 percent penetration rate in the United States alone, mobile phones are not going away, and smartphone growth is catching up.

Currently, there are 6 billion mobile subscribers worldwide, with more than 1.2 billion of them accessing the web at any given time. These individuals are shopping, banking, watching videos, playing interactive games with other players, texting, or e-mailing on their devices. Smartphone users are actually three times more likely to provide their log-in information when prompted than those accessing the Internet from a personal computer, according to the computer and network security company RSA. Given these trends, fraudsters are once again taking advantage of the weak spot and using technology to spread malware onto mobile phones.

Less than 50% of Mobile Consumers Find Many Dangerous Behaviors to be Risky

While the number of individuals accessing the web is staggering, perhaps even more amazing is the increased usage of mobile devices for sending text messages. In 2011 alone, more than eight trillion text messages were sent. As such, text messaging fraud—or “smishing,” a term created from the abbreviation for short message service SMS—is now becoming a tool of choice for fraudsters.

Is your phone protected? Studies conducted in the United States and abroad show that only 4 to 10 percent of all phones have antivirus software, compared to over 80 percent for personal computers. It's just as easy for a cybercriminal to gain access to your financial institution through a mobile text or a mobile e-mail account as it would be on a computer. Could protection and education about mobile security be the ticket to reducing account takeovers? I believe it can. Taking a bite out of that 90-percent statistic for unprotected smartphones most certainly will deflect attacks that could penetrate through to the financial environment. T-Mobile recently announced it was teaming up with Lookout virus protection to begin shipping most Android models with out-of-the-box protection against malware and viruses. This move could be a significant first step in virus protection, especially if other phone manufactures were to follow suit.

What can you do? Well, there are a few things, including:

  • Install a certified virus application on all family devices and set them to run weekly (many good options are free).
  • Don't change the default security restrictions by jail breaking your device. Only download applications from a reputable vendor application marketplace (Google Play store or iTunes, for example).
  • Review and make sure you understand any pop-ups, e-mails, or texts before you click.

For more information related to account takeovers, check out the Risk Forum's recent survey paper, "Mitigating Online Account Takeovers: The Case for Education."

Michelle CastellBy Michelle Castell, senior payments risk analyst in the Retail Payments Risk Forum at the Atlanta Fed

April 8, 2013 in cybercrime, identity theft, mobile banking | Permalink

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March 25, 2013

What's Next in Mobile Payments?

I recently participated in two banking conferences that displayed the full spectrum of strategic options and plans of banks regarding mobile payments. The first event was the annual operations/technology conference of a statewide bankers' association with all the attendees being small- to mid-sized community banks. All these banks currently offer an online banking application to their customers; about half of these have customized their online banking application for mobile device usage. Only one bank indicated they had a mobile payments application currently in operation. I was surprised to find that only a couple other banks planned to offer a mobile payments application within the next 12–18 months.

Later in the day, a panel of four MBA graduate students from a prestigious business school of a private southeastern university gave their views on mobile payments. The objective of this panel was to help the bankers understand the key drivers of this demographic's banking relationships and needs. All four panel members indicated they frequently accessed their banks' online banking services with their mobile devices as well as their laptops and tablets. They also unanimously stated they would switch financial institutions if the banks didn't offer the service or if they began charging a fee for the service. Interestingly, only one panelist used the mobile payments application from his bank, and his usage was infrequent. The reasons the panel members gave for their disinterest in mobile payments included difficulty of use of a mobile phone versus a laptop or tablet for bill payment or little need for the service because they found their existing payment methods to be as or more convenient.

At the Bank Administration Institute's (BAI) Payments Connect 2013 conference the following week, a featured track of the two-and-a-half-day event was the wide range of marketing, operational, risk, and technology issues related to mobile banking and payments. The prognosis for mobile payments couldn't have been more optimistic, with a number of panelists declaring that the tipping point for mobile payments had been realized earlier in the year. They credited the adoption rate for smartphones and other indicators they believed to be key drivers. Of course, we have to realize that many expressing such optimism worked for a company that has a vested interest in the success of mobile payments. However, that optimism was supported by a number of research studies delivered during the conference that concluded that the rate of smartphone penetration, the growing volume of mobile payment transactions, and overall consumer attitudes would translate to successful mobile payments programs.

One of the questions bankers frequently asked during the BAI conference was what a panelist would recommend the bank do regarding their mobile payments strategy. While there were some slight variations, panelists consistently responded that banks should get involved now and try a number of different, small-scale strategies. Several panelists used the gambling analogy of placing a distributed number of bets of small amounts rather than going "all in" with one particular mobile payments scheme. They acknowledged that the technology winner(s) of mobile payments was far from certain at this point, with near field communication, QR codes, and cloud options all in different states of adoption and each with their individual advantages and disadvantages.

The practice of "spreading your bets" is certainly a valid risk management strategy, but how practical is such a strategy for small financial institutions? The large banks have their research-and-development budgets, IT development staff, and other resources that allow them to participate in multiple pilot programs, but smaller institutions do not have such resources. Most would be able to offer only a mobile payments program supported by their core application processing provider.

As with many new payment products in the past, larger banks have led the initial efforts, and the smaller banks followed suit after customer demand for the service became more certain and with the realization that not offer the service would put them at a competitive disadvantage. Could this be the reason many banks, especially the smaller ones, have been sitting on the sidelines for now until the mobile payments picture becomes a bit clearer? Let us know what you think.

David LottBy David Lott, a retail payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

March 25, 2013 in mobile banking, mobile payments, payments | Permalink

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January 22, 2013

Parallel Paths or Course to Collision? Technology's Effects in the Payments Industry

I don't believe anyone would challenge the statement that the pace of technological change is faster than ever and is likely to increase its velocity going forward. I remember a conversation with my grandfather in the mid-1970s about the biggest changes he'd experienced in his lifetime, which spanned the first two-thirds of the 20th century. Those changes centered on the automobile and airplane (his lifelong vocation was a railroad machinist/mechanic), electricity for the masses, medicine, and radio and television. Today, we can look back just 10 years and see the exponential level of changes in technology that have impacted our everyday lives in these same areas—transportation, energy, medical care, and communications.

Many of these technological changes have affected the banking world, sometimes in ways that create conflicts among various service channels. Recent changes in the way that U.S. banking customers deposit funds, for example, have the potential to create such conflict across channels.

The all-time teller gets a new face
Since the widespread introduction of the full-service ATM in the United States in the early 1970s, this automated delivery channel has seen little change in functionality. Sure, there have been major technology changes that have improved the channel but not fundamentally changed it. Such improvements include the migration from offline to online transaction authorizations, the ATM's ability to dispense multiple denominations of currency instead of a fixed amount, improved display graphics and component reliability, and the sharing of ATMs through the emergence of regional, national, and international interchange networks. Past efforts in the U.S. to add additional functions and migrate the ATM more to a self-service kiosk have not met with great success. There appears to be another attempt to introducing such functions as remittances, bill payment, money orders, postage stamps and ticketing as ATM volume stagnates.

Deposits made through ATMs seldom represent more than 10 percent of total banking transaction volume, and are more often in the 5–8 percent range. Research has consistently shown that consumers are apprehensive about placing checks and currency in ATMs since ATMs do not verify the deposit envelope contents, as tellers do. Truth be told, banks generally didn't actively promote deposits through ATMs for economic reasons. Because deposit envelopes can be deposited empty, most banks required them to be processed under dual control. As a result, until relatively recently, the cost of handling a single ATM deposit was about $1.50 to $2.

A big breakthrough in ATM deposits was seen in 2006–07, when several of the largest U.S. banks began testing ATMs that could accept envelope-free deposits of checks and currency. This method offered consumers images of their checks or detailed listings of the deposited currency before the transaction was final. Because consumers had this opportunity to verify their deposits, they had a much higher level of comfort. Additionally, consumers could now make their deposits much later in the day and still have them included in that day's processing. These banks soon began widespread implementation of such functionality in a vast majority of their locations, and other top-tier banks followed suit. The reassurance of the deposit verification and the increased convenience has led to a sharp increase in deposit transactions through the ATMs equipped with this feature. Furthermore, studies show that the cost of a deposit transaction dropped below 50 cents.

It appeared like a win-win-win outcome. ATM channel managers and manufacturers both were pleased with the new functionality. And bank customers were obviously pleased, as evidenced by the increased deposit transaction volume through the ATM.

Meanwhile, in a parallel universe...
At the same time that ATMs were getting new functionality, the remote deposit capture product was being developed. This product was first offered to commercial bank customers that received moderate volumes of checks. Company employees scanned the checks on dedicated equipment and then transmitted the captured images to the bank. This product was made possible under the provisions of Check 21. Then the banks expanded the service to include low-volume check businesses using generic scanners that the business likely already possessed. And most recently, a number of banks have begun offering remote deposit capture to both consumer and commercial customers as part of their mobile banking service with the camera feature on a smartphone.

In our ever-changing technology environment, the role of product and channel management has never been more difficult. Products that are technology-dependent can have an extremely short lifecycle and face competition from other sources. Will the proliferation of the remote deposit mobile application dampen the demand for envelope-free deposit accepting ATMs, especially at the smaller banks? Will these technologies collide, or will they continue to move down parallel paths? How will this technology and others come to impact the future of the ATM? We would like to hear your perspective.

David LottBy David Lott, a retail payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

January 22, 2013 in emerging payments, innovation, mobile banking | Permalink

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Banks and Financial institutions invest heavily in improving customer convenience and customer experience. Envelope free ATMs are one such facility that has gained significance off-late. In emerging markets like India, ATMs function well as a self-servicing kiosk. Many ATMs in India support P2P transfers and even opening of "fixed deposit" accounts. Pilots are underway to provide options to open Mutual Fund accounts. Obviously these services attract more customers to the ATM outlets.

On the other hand, remote deposit captures have gained significant acceptance in the market recently. With the smartphones volumes increasingly eating into the feature phone’s market share, “remote deposit capture” is set to gain more popularity, given its sheer convenience to the customer.

At the same time, one has to bear in mind the preferences of Gen Y. Today, customers want everything “on the move”. The advent of mobile technology only accelerates this process. With more innovations coming up in mobile based micro payments, the usage of cash will decrease gradually. It may even reach a negligible size down the years. Paper based checks are already on the decline and will meet its natural death soon – Regulatory bodies in some European countries had mandated the stoppage of check payments long back. With papers based payments going down, the demand for remote deposit capture will also decline.

So when we compare envelope free ATMs with remote deposit captures, my take is that both will meet their natural death soon – may be in a few years. However, in the current scenario, given the nature of Gen Y, remote deposit capture will stand to gain over envelope free ATMs.

Posted by: Pari | January 29, 2013 at 09:33 AM

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