Using smartphones to deposit checks is becoming increasingly popular in the US, with one in three American consumers having done so in the past year, according to the American Bankers Association (ABA).
The growth in mobile deposit suggests that consumers want convenience and are increasingly willing to use the latest technologies to get it. It’s also representative of a wave of digital disruption in retail banking that could pose a threat to traditional financial institutions (FIs).
‘Sophisticated and user friendly’
More than one in three respondents to the ABA survey (35 per cent) said they had completed a mobile deposit in the past year, using their phone’s camera to scan the check. Within this group, more than half of consumers said they used mobile deposit at least once (26 per cent) or twice (27 per cent) a month. Nearly four out of ten (38 per cent) accessed this facility less than once per month, while nine per cent used it three or more times every month.
Nessa Feddis, senior vice-president and deputy chief counsel for consumer protection and payments at the ABA, pointed out that the growth of innovations like mobile banking and mobile deposit is fueled by consumer demand. She said FIs are responding to their customers’ demands for speed and convenience, without sacrificing security.
“Banks will continue accommodating diverse customer needs and preferences through multiple convenient channels, with a special emphasis on expanding and enhancing their digital services,” Ms Feddis added.
She also noted that the recent growth in mobile deposit can partly be attributed to the fact that the technology is “more sophisticated and user-friendly than ever before”.
Is digital disruption a concern for traditional FIs?
The increasing popularity of mobile deposit in the US is just one element of a wider trend that spans the global retail banking industry – the technological enablement of new processes and business models, some of which could pose a threat to traditional FIs that are struggling to move away from entrenched methods and legacy systems.
This digital disruption is particularly evident in Europe. In the UK, five new digital banks have been awarded licenses or launched services this year: Starling, Tandem, Atom, N26 and Monzo. Juniper Research also noted in a report that approximately 20 firms are currently in discussions with regulators to acquire their licenses.
We’re also about to see regulatory changes opening up the payments industry to pure-play operators and fintechs in the EU. One of the key objectives of the second iteration of the Payment Services Directive is to make it easier for payment and account information services providers to enter the market, which will place a requirement on banks to share their customer data.
Nitin Bhas, author of the Juniper Research report, said established FIs will face some big challenges as the industry continues to grow and evolve, but new entrants will have to prove their worth too.
“Recent industry shifts highlight why traditional banks must respond rapidly to retain market share by cultivating new revenue channels and enhancing existing base through sustained innovation,” he said. “However, the challenge here for new players is to increase market share and maintain profitability in the long-run.”
Just like in any sector, change is inevitable in financial services. It’s the FIs that embrace collaboration and welcome change as an opportunity, rather than a threat, that will move with the times and keep up with their customers’ evolving expectations.