Small businesses are at the heart of the American economy. The federal government reports that businesses with 500 or fewer employees employ 60 million Americans, or about 40 percent of the workforce, and account for 45 to 50 percent of national GDP. Small businesses also contribute significantly to banking revenues. McKinsey & Company estimates nearly one-quarter of banking revenues (net of charge-offs) comes from small businesses and their owners’ personal credit and deposit products.
So why are financial institutions’ relationships with small businesses so tenuous? One in five small businesses surveyed by Aite Group last year related that they probably or definitely would switch financial institutions within two years. Deloitte reports that 50% of small businesses it surveyed would consider consolidating all of their banking with one financial institution, if they offered the products and services they wanted.
Against this backdrop, remote deposit capture (RDC), and in particular mobile RDC, have become table stakes for banks and credit unions competing for small business revenues, particularly among the mobile-first millennial generation. However, most small business RDC initiatives at banks and credit unions have been built on large corporate and consumer RDC platforms, and neither is a particularly good fit for most small businesses.
Success in the small business market demands banks and credit unions provide solutions that are easy to configure and integrate with existing technologies and processes; scalable solutions that leverage the latest technologies to accommodate a range of check volumes and use cases. These solutions need to be cloud-based, and the end-user experience must be frictionless, secure, and device and channel independent.
Mobile RDC can be particularly challenging for banks and credit unions to deploy for businesses, especially as pressure mounts from their business customers for true commercial solutions, not just re-branded consumer applications. At Cachet, our response has been to develop innovative RDC solutions like our Select Business mobile application to provide banks and credit unions with unparalleled flexibility in serving their business customers.
For example, the ability to deploy what we refer to as “mobile scanners” allows businesses to create multi-check batch deposits from a mobile device. This eliminates a key barrier to entry for RDC—costly scanner hardware—for small businesses that may only deposit a handful of checks each day. By offering a true commercial multi-check application, banks and credit unions also demonstrate that they understand the unique needs of their business customers and are committed to delivering innovative solutions to fit those needs.
Despite predictions to the contrary, checks remain a popular payment method in the United States, particularly among small businesses. In fact, many small business owners say they prefer checks to credit and debit cards with their confusing and costly interchange fees. Banks and credit unions ignore this fact at their peril. Aite survey results illustrate why. Asked about the importance of online and mobile capabilities in the new-bank decision process, well over half (58 percent) of all small businesses surveyed said it was important or very important. Among the largest small businesses ($5 million and above in revenues) nearly three-quarters (72 percent) are looking for sophisticated online and mobile banking capabilities like mobile deposit, Aite reports.
We’ve seen broad adoption of RDC among consumer and large corporate customers at financial institutions. Small business is the next big growth area for RDC, and mobile functionality will drive much of this growth. Banks and credit unions that ignore this will find non-bank financial technology companies (like Square and On Deck) eager and ready to pick up the slack.