Bank of America Corp., operator of the nation's largest mobile-banking program, is planning to test a service that would enable customers to deposit checks from their Apple Inc. iPhones, a move that could transform a niche application into a mainstream offering. If the service takes hold, it possible could threaten the role ATMs play in handling check deposits.
Charlotte, N.C.-based BofA is not the first to offer mobile remote-deposit capture to consumers, but when the anticipated test kicks off sometime this year it almost would certainly be the biggest, and that kind of market clout could prompt other banks to follow suit, according to analysts.
That is because BofA's mobile-banking program includes millions of customers. The bank also expects mobile banking to grow exponentially at the expense of its brick-and-mortar branches.
"BofA entering the fray is by definition a game-changer," says Bob Meara, a senior analyst at the Boston-based market-research company Celent LLC.
Nicole Sturgill, research director for delivery channels at TowerGroup, agrees. "This will be a driver for other top 10 banks to do this," she says.
According to several individuals familiar with the project, BofA expects to test the service initially as an upgrade to its existing mobile-banking application for iPhones. About 40% of BofA's mobile-banking customers use iPhones or one of the iPod Touch devices, Douglas Brown, BofA senior vice president of mobile product development, told Computerworld Financial in June. BofA introduced its mobile service in May 2007.
The bank likely will expand the test next year to include users of Research in Motion Ltd.'s BlackBerry devices and phones that use Google Inc.'s Android operating system.
The service would enable consumers to use the phones' built-in cameras to photograph the front and back sides of checks. The software transmits the images to the bank, which processes the electronic deposits.
BofA Follows USAA
BofA will be following USAA Federal Savings Bank, which in August became the first U.S. financial company to offer a consumer remote deposit-capture service for mobile phones by upgrading its existing iPhone application (ADN, 8/13). USAA, a $35.4 billion-asset company, provides financial services to 7.2 million members of the U.S. military and their families deployed throughout the world.
By all accounts, the USAA service has been a big hit. In the first six weeks it was available, about 270,000 members installed the updated iPhone application, and about 40,000 of them have used the software to deposit more than 100,000 checks worth a total of $61 million, according to Jeff Dennes, USAA executive director of mobile. Users deposited a daily record $2.2 million through the iPhone app on Sept. 30, Dennes says.
The San Antonio-based company plans to provide the mobile-deposit service to BlackBerry and Android users in the first quarter of 2010.
USAA serves a specific market; half of its 1 million mobile users are active-duty military personnel. A service that enables customers to make deposits from just about anywhere is well-suited for a customer base that can be deployed just about anywhere.
But USAA's deposit volume is something that likely will make banking executives "wake up," says Lani Hayward, executive vice president of creative strategies at Umpqua Holdings Corp. in Portland, Ore.
The $8.8 billion-asset Umpqua plans to test its first mobile-banking application next quarter, offering the standard capabilities such as checking balances and transactions. The banking company is also considering adding remote-deposit capture, though it has no definite plans to do so, Hayward says.
"Basic online-banking services through phones didn't move the needle," Hayward says. "Mobile applications that are starting to come out now will be much more effective in actually changing consumer behavior."
BofA declined to provide an executive to discuss its mobile-banking strategy, though BofA spokesperson Tara Burke says "we continue to look at new technologies to make banking easier for customers."
BofA announced in July that it planned to close 10% of its 6,100 branches nationwide because of the growth in online and mobile- banking transactions. The bank has more than 3 million mobile-banking customers, and it operates the nation's largest bank-owned ATM network, with 18,254 machines as of September 30.
In the struggle between mobile banking and ATMs, mobile banking may win because of consumers such as Aaron McPherson, research manager for payments at IDC Financial Insights of Framingham, Mass.
McPherson says if he could deposit with an iPhone, he would not make trips to his bank's ATMs to deposit checks.
Consumer Choice A Factor
Consumers already are making fewer trips to ATMs to withdraw cash because they are paying for more purchases with their debit and credit cards, McPherson says.
ATM manufacturers also have thought about consumers like McPherson.
NCR Corp., the world's largest ATM manufacturer based on annual shipments, signed an agreement with San Diego-based Mitek Systems Inc. that enables NCR's bank customers to deposit checks from their mobile phones.
Asked about the potential impact check deposits from mobile phones might have on bank ATMs, Thomas W. Swidarski, president and CEO of Diebold Inc., said at SourceMedia's ATM, Debit & Prepaid Forum this week it would be a "this or that" choice, suggesting consumers would pick the deposit option they prefer.
As the largest bank in the U.S. by assets, BofA has the kind of heft that other banks cannot ignore, and its test of mobile remote capture will be the biggest endorsement by far of this emerging technology.
According to data released in March by ComScore Inc., a digital marketing firm, about 35% of all U.S. consumers using their phones for financial services were doing so with BofA, well ahead of any other bank.
JPMorgan Chase & Co. followed with 12% share, Wells Fargo & Co. with 9%, Citigroup Inc. with 5%, and BB&T Corp. and PNC Financial Services Group Inc. with 2% each.
BofA offers mobile services free to its online customers through most mobile and smartphone handsets, including the iPhone, the BlackBerry and Android. The most-popular uses are checking account balances, viewing recent transactions and paying bills, Burke says.
ComScore, of Reston, Va., estimates that more than 15 million U.S. consumers use mobile-banking services each month, and it expects that figure is expected to grow as cell-phone networks become faster and more consumers purchase smartphones.
USAA's mobile-deposit feature builds on its Deposit@Home application, which it introduced in 2006 and enables customers to deposit checks electronically using personal computers and at-home scanners. In most cases, funds deposited are immediately available.
USAA's systems, which the company developed in-house, immediately verify the deposit information and signature toDiebold Inc.'s decision to open a direct-sales office in Turkey is timed to coincide with Turkish banks replacing their existing ATMs in Western Europe's fastest-growing market for new ATM deployments.
But Diebold faces a tough challenge because NCR Corp. and Wincor Nixdorf AG, Diebold's two-largest competitors, control 93% of the country's ATM market.
Diebold's team of four direct-sales staff last Friday opened an office in Istanbul, Mike Jacobsen, a Diebold spokesperson, tells ATM&Debit News. Diebold's sales team replaces a third-party distributor that called on banks for Diebold, Jacobsen says. Istanbul is Turkey's largest city, with a population of 12.6 million.
The manufacturer is moving to court Turkey's banks because it expects the market for new ATM purchases to rapidly grow.
"The ATM market in Turkey is one of the fastest growing in the [Europe Middle East Africa region]," Danillo Rivalta, vice president and general manager for Diebold EMEA-Southern and Central Area, said in a statement. "We also know that many banks currently are replacing their old equipment, and we believe there are a number of compelling reasons for the banks to choose Diebold."
Jacobsen describes Turkey as a burgeoning market similar to some in Eastern Europe.
At the end of 2008, Turkey's banks had deployed 22,586 ATMs, a 20% increase from a year earlier, Dominic Hirsch, managing director of Retail Banking Research, a London-based strategic-marketing firm, tells ATM&Debit News.
An influx of foreign capital into Turkey's banking market has resulted in increased competition among the country's banks, leading to more bank-ATM deployments, Retail Banking Research reports.
Last year, Turkey added 3,768 new ATMs, making it the leading country for ATM deployments in Western Europe for the fourth consecutive year, Retail Banking Research says.
Turkish banks, however, were not the only ones deploying ATMs.
Talon, a nonbank ATM deployer and a new player in Turkey's ATM market, installed 600 ATMs last year.
Turkey is the sixth-largest ATM market behind the "big five" countries in Western Europe, which include France, Germany, Italy, Spain and the United Kingdom, Hirsch says.
Its next-closest competitor in ATM deployments is Belgium. Bank deployment of ATMs in Belgium increased 8% in 2008, Hirsch says.
Retail Banking Research includes Turkey among countries in Western Europe, although geographically Turkey is located in Southeastern Europe and Western Asia.
"We include Turkey in Western Europe, partly for historical reasons," Hirsch says. "It started to grow its ATM market in the early 1990s, at the same time as many of the countries in Western Europe. In contrast, the [Central and Eastern Europe] only really started growing strongly in the last five to 10 years."
North Canton, Ohio-based Diebold will find tough competition in Turkey, but company executives say they are confident.
NCR Corp., the world's largest ATM manufacturer based on annual shipments, and Wincor Nixdorf AG, the world's second-largest ATM maker, may claim the vast majority of the ATMs sold throughout Turkey, but Jacobsen sees an opening for Diebold.
"As banks increase their capacity, [Diebold] will be able to keep up with their growth," he says.
Diebold will manufacture ATMs destined for Turkey at the company's plant in Budapest, Hungary, Jacobsen says. Diebold also has signed a contract with an unnamed third party to service the company's machines in Turkey.
Diebold expects to sell a range of ATMs to banks there, including multifunctional ATMs and cash dispensers.
Diebold is attempting to convince Turkish banks to approve its Agilis EmPower software, which enables bank employees to change their ATMs' functionality, including language and bill denomination, in-house.
Turkey is one the most innovative and progressive countries in terms of bank innovation, Hirsch says, noting that Turkey's bankers are open-minded and that attribute may benefit Diebold. ATM