Summary of Survey Findings

Status of Image Migration, Branch Capture and Remote Deposit Capture Among Independent Bankers Association of Texas (IBAT) Members

October 2007

Conducted in conjunction with:

ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

CONTENTS
OVERVIEW ..............................................................................................................2 BRANCH CAPTURE ..................................................................................................2 REMOTE DEPOSIT CAPTURE (RDC) .........................................................................2 CONCLUSIONS AND RECOMMENDATIONS ..................................................................2 SURVEY RESULTS ...................................................................................................4 Respondents Asset Size.................................................................................4 Image Migration Strategy Responses ...........................................................4 Branch Capture Responses ...........................................................................6 Remote Deposit Capture Responses ............................................................8 WHO IS ABOUND RESOURCES?..............................................................................11

©Abound Resources, Inc. and IBAT 2007

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ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

KEY FINDINGS AND COMMENTS BY ABOUND RESOURCES
OVERVIEW
In September 2007, Abound Resources, Inc. conducted a survey of IBAT member banks to identify where the Texas market is currently with image migration, branch capture, and remote deposit capture, as well as to understand remote deposit capture pricing. Over 1,100 members were invited to participate in the survey and the initial efforts produced a response rate of 13%, or 142 total respondents. The survey was anonymous, however participants were asked to identify their asset size for categorization.

BRANCH CAPTURE
IBAT member banks are significantly ahead of the national average in branch capture installations (46% of IBAT members have branch capture installed vs. the average national bank at 25%(1)). Abound believes that the faster branch capture adoption rate in Texas has been driven, in part, by the wider geographical distribution of branch networks. The greater reduction in courier costs creates a more compelling business case for branch capture.

REMOTE DEPOSIT CAPTURE (RDC)
IBAT member banks with assets under $1 billion are behind the national average in remote deposit capture installations, 24% of IBAT members versus the national average of 32%(1). IBAT member banks using remote deposit capture have fewer customer installations than the national average (15.5 customers set up for remote deposit capture, versus the national average of 19, which jumps to 38 when you include the top 10 banks with 4,200 deployments each (1)). IBAT member banks charge more for remote deposit capture than the national average (75% of IBAT member banks offering remote deposit capture charge a monthly maintenance fee greater than $40 vs. only 33% of banks nationally charging a monthly maintenance fee greater than $40(2)). One possible reason that IBAT banks charge higher monthly maintenance fees is that 43% of respondents bundle the scanner fee into the monthly maintenance fee.

CONCLUSIONS AND RECOMMENDATIONS (3)
Abound Resources saw no correlation between the relatively low remote deposit capture penetration among IBAT member banks and the fact that they are pricing this product above the national average. Instead, Abound believes the following contributes to the low penetration: o Lack of CEO leadership – As the case with most initiatives, if the CEO is not championing remote deposit capture, the initiative will fail or only have modest success. Banks that have been successful with marketing remote deposit capture involve the entire bank in their sales efforts and have senior management sponsorship and visibility.
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©Abound Resources, Inc. and IBAT 2007

ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members o Defensive, not offensive strategy – IBAT member banks with low customer penetration appear to have adopted a defensive strategy. In learning that competitors are calling on one or more of their larger commercial customers, they have quickly rolled out a remote deposit capture solution and offered it only to the customers they think may be in jeopardy. IBAT member banks with high customer penetration appear to have adopted an offensive strategy. They view RDC as a tool for growth including core deposit growth. Perception that small community banks don’t need it – Some CEOs in smaller banks assume their customers would not be interested in remote deposit capture. Small and large companies across all industries and geographies have responded favorably to remote deposit capture, but the only way to truly gauge your customers’ interests is to ask them. Fear of fraud - In a follow up survey conducted via webinar, 82% of IBAT member banks stated they would have more customers using remote deposit capture if the bank was more comfortable with the risk. Learn to manage the risk instead of allowing risk to manage you. Conduct a risk assessment, adopt the appropriate mitigation strategies, develop a customer underwriting process, use a comprehensive agreement that spells out the responsibilities and liabilities of all parties, and develop a product contingency plan. No marketing and sales plan. Questions about pricing remote deposit capture are the most oft asked, but pricing is only one piece of the marketing and sales plan. Many of the most successful remote deposit capture banks are charging healthy premiums for this service – the success is based on a well executed marketing and sales plan.

o

o

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Recommendations for those not yet doing Remote Deposit Capture o Talk to your customers. Call your 10 largest commercial depositors this week and ask them “Would you like to eliminate the daily costs and hassle of the daily trip to the bank to make your deposit?” If the response is favorable, send a survey to all of your commercial customers to gauge interest. o If you decide to move forward, build a plan for your product deployment and product marketing. Be sure your plan includes educating internally and externally, focusing your sales efforts on benefits not the complicated features, and assigning a product manager to stay on top of your sales efforts and product delivery. Recommendations for those disappointed with your RDC initiatives o Talk to your customers using remote deposit capture. Get their insights into what’s working and what’s not. o (Re)build your marketing and sales plan to include your ideal targets, your benefit language, your promotion and pricing. Get out of the office, go visit prospects and don’t forget your website.
(1)

March 2007 Celent survey ABA Banking Journal Community Bank Competitiveness Survey 2007 (3) Abound’s conclusions are based on the survey findings, follow up conversations with IBAT member banks, and Abound’s advisory work with IBAT member banks.
(2)

Additional findings can be found in the complete summary.

©Abound Resources, Inc. and IBAT 2007

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ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

SURVEY RESULTS Respondents Asset Size:
Asset Size 14% 11% <$50MM 7% $51-100MM 26% 14% $101-250MM $251-500MM $501-1BB >$1BB 28%

Image Migration Strategy Responses:
1. Does your bank have an image migration strategy (a plan to move from check

processing to full image exchange)?

No

15.5%

Yes

84.5%

Based upon the answer to question 1, respondents were asked one of the following questions.

©Abound Resources, Inc. and IBAT 2007

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ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

1.1. If Yes to 1 - Does your image migration strategy include any of the

following?
Using core or Item Processing vendor to access an im age exchange netw ork Using Federal Reserve offerings 40% Using an upstream correspondent

1%

29%

Other 30%

1.2. If No to 1 - Please check the statement(s) below which best describes your

current status related to image migration. (Select multiples if applicable.)

Waiting on our core vendor or item processing vendor to lead the w ay

30% 10%

Waiting on m ore banks to adopt

Waiting for a m ore com pelling ROI

20%

No urgent need

50%

Other

20%

Of the respondents who selected “other”, some of the answers included the following: • Liability potential • Waiting for better processes in place

©Abound Resources, Inc. and IBAT 2007

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ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

Branch Capture Responses: The survey continued on to ask questions about branch capture to determine where this technology fits into plans to image enable back offices.
1. What is the current status of branch capture (checks scanned at branches and the image files are transmitted to back office) in your bank?

13%

No plans to im plem ent in near future

11% 46% 12%

Planning to im plem ent but haven't started evaluating options Evaluating options now

Have signed contracts, in process of im plem enting Currently using, have branches live w ith product

18%

If respondents answered “Currently using, have branches live with product” to the previous question then they were asked the following three questions:
1.1. How many branches are using the product? (Open ended question.) The following graph depicts the range of answers:
15%

1 to 5 6 to 10 20% 11 to 15

65%

©Abound Resources, Inc. and IBAT 2007

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ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

1.2. Did you deploy at all branches?

No

23.3%

76.7%
Yes

1.3. Are you doing:

Both

8.3%

76.7%
Back counter

Teller line capture

15.0%

©Abound Resources, Inc. and IBAT 2007

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ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

Remote Deposit Capture Responses: The objective in asking questions regarding remote deposit capture was to identify if IBAT banks were live with the product, how successful they have been in offering the product, how they were pricing the product, and how they are deploying scanners.
1. What is the current status of remote deposit capture in your bank (also known as corporate capture or merchant capture – where your customers can scan checks and electronically make deposits from their offices)?
18% 32% No plan to offer in next 12 m onths Planning to offer but haven't started evaluating options Evaluating vendor options now Have signed contract, in process of im plem enting Currently have custom ers using product 8% 25%

17%

If respondents answered “Currently have customers using product” to the previous question then they were asked the following four questions.
1.1. How many customers are using the remote deposit capture product? (Open ended question.) The following graph depicts the range of answers.
8% 13% 1 to 10 10 to 25 25-50 50 or m ore 17% 62%

©Abound Resources, Inc. and IBAT 2007

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ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

1.2. Do you charge for remote deposit capture?
5% 15%

Yes No Not sure

80%

1.3. How are you pricing remote deposit capture? (Please enter a figure for all that apply.)

Monthly m aintenance fee One tim e installation fee Per check charge Per location m onthly m aintenance fee Per deposit charge
62%, Avg. $383

90% Avg. $62

55%, Avg. $0.11

48%, Avg. $37

45%, Avg. $0.30

Other

31%

Respondents who answered “other” gave answers such as: • • $25 for each additional location Return item $5

©Abound Resources, Inc. and IBAT 2007

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ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

1.4. Please check all that apply regarding deploying scanners to customers. (Respondents could choose multiple answers.)
The bank is responsible for scanner m aintenance The bank orders and deploys scanners directly to custom ers We allow custom ers to pay for scanners included in m onthly m aintenance charge We do not charge custom ers for scanners We lease scanners through a third party We lease scanners to our custom ers and the bank provides the financing We use a third party for scanner m aintenance We use a third party to deploy scanners Other
2.7% 16.2% 8.1% 8.1% 45.9% 27% 43.2%

48.6% 86.5%

Respondents who answered “other” commented that customers can pay for the scanners up front.

©Abound Resources, Inc. and IBAT 2007

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ABOUND RESOURCES, INC.
Status of Image Migration, Branch Capture and Remote Deposit Capture Among IBAT Members

WHO IS ABOUND RESOURCES?
Abound Resources, Inc. is a leading technology advisory firm for community banks that helps you make the right technology decisions. Whether you are purchasing remote deposit capture, evaluating a core processing system, negotiating technology contracts, or starting a de novo bank, Abound Resources offers advisory services that can meet most any need and budget for a variety of projects. Not simply a traditional consulting firm, Abound's methodology the RightTech™ Cycle, is a proven process that has been used successfully in over 350 technology vendor evaluation projects. Having been former COO's and CIO's of community financial institutions, Abound's executive team has the first hand experience to lead you through the process. And rest assured Abound has no vendor affiliations, which is one of the many reasons the firm is able to guarantee that you will make the right decision.

For more information please contact:

Abound Resources, Inc.
13740 Research Blvd. Suite 2, Building T 512-231-1750 (p) 512-231-1752 (f) www.aboundresources.com

©Abound Resources, Inc. and IBAT 2007

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