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Consumer Remote Deposit Capture:Making the Case
Matthew Bowen, SVP & GM, Check Imaging Solutions, FISAndrea O’Connor, VP & Chief Deposit Officer, State Farm Bank
• Please turn off all cell phones or mobile devices.• Thank you to today’s sponsors!
– This morning’s Continental Breakfast sponsored byJavelin
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Thanks to all of ourTrack Sponsors!
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Agenda
• Company highlights– FIS– State Farm Bank
• What is consumer RDC?• State Farm Bank’s consumer RDC initiative• What is the industry saying about consumer
RDC?• Risk management• Lessons learned• Q&A
FIS – An Industry Leader
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FIS: A Market Leader
• 30,000 employees worldwide• More than 40 years of market
leadership and $5 billion inrevenue
• Member of the Standard andPoor’s (S&P) 500 index
• #1 technology provider to theglobal financial industry
• 14,000 clients in more than 100countries
• 25 strategic operating centersoutside the U.S.
• Clients include 9 of the top 10, and40 of the top 50 global banks
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FIS Check Image Solutions
• 23 check imaging centers serving more than 950 clients• More than 2 billion items captured in FIS centers in 2010• Over 1,000 inhouse clients• 12 lockbox service centers serving 3,600 customers• More than 12,000 branch capture and 75,000 merchant capture deployments• 15 teller capture deployments –1,000+ branches, over 6,000 teller
workstations• 25 consumer remote deposit deployments; 85,000+ enrolled users• Brinks partnership supports highdollar “vault” deposits for largest U.S. banks• Endpoint Exchange image exchange platform
– 18 of the largest 25 Financial Institutions in the U.S.– 6,000+ U.S. Financial Institution users
State Farm Bank®
My Time Deposit
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Our Mission, Our Vision, Our Shared Values
• The State Farm® mission is to help people manage therisks of everyday life, recover from the unexpected, andrealize their dreams.
• We are people who make it our business to be like agood neighbor.
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Our Mission, Our Vision, Our Shared Values
• Our success is built on a foundation of shared values quality service and relationships, mutual trust, integrityand financial strength.
• Our vision for the future is to be the customer's first andbest choice in the products and services we provide. Ourcustomers' needs will determine our path. Our values willguide us.
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State Farm Bank®
• State Farm Bank opened March1999
• Why was the Bank formed?– Meet State Farm customer’s
financial needs– Deepen & grow customer
relationships– Reinforce the insurance book of
business
What is Consumer RDC?
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A Brand New SelfService Channel• It’s the next movement in consumer selfservice banking• Current focus among several emerging new self service channels• Leverages inplace technology like smart phones and TWAINcompliant scanners
Traditional deposit channels Selfservice deposit channels
•Branch•BankbyMail•Lockbox•Courier/Cash VaultCharacteristics
• Centralized / On Premise• Limited Availability• MultiStep / Batch• Labor Intensive• Higher Cost
•ATM Image Capture•Commercial/Business RDC•Accounts Receivable Image Deposit
File•Consumer / MobileCharacteristics
• Decentralized / Off Premise• 7 X 24 Availability• Automated / Real Time• Lower Cost
Past / Current Emerging / Future
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What is Consumer RDC?
• What is it? Why would we or a consumer client want it?• Can we charge for it?• How do we qualify our consumer clients for the service?• How do we manage the risk?• Do we need a mobile banking product in order to offer mobile
deposit?• Who’s offering it today and how successful have they been?• What is the impact on us from an operational standpoint?• Are patents an issue with mobile deposit?• How long does it take to implement?
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Mobile RDC: Planned Growth
• 2010 showed planned FI adoption doubling
6%
15%
20%
36%
72%
45%
0% 20% 40% 60% 80% 100%
2009
2010
Percent of Respondents
Have a Solution Piloting Planning a Solution Considering No plansSource: Celent, The Future of Consumer RDC
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Consumer Remote Deposit CaptureOverview
• Consumers deposit checks using smart phones or flatbed scanners
• Everyone Benefits– Convenience– Time savings– Lower deposit costs– Differentiation through innovation– Customerowned technology
• Early adopters include:– USAA Deposit@Mobile –August 2009 launch
– JP Morgan Chase Quick Deposit – July 2010 launch
– State Farm Bank MyTime Deposit –July 2010 launch
– Rockland Trust mDeposit –February 2011 launch
• Micro/small business clients are also candidates
• How to manage the risk?– Restrict access (know your customer) and closely monitor activity– Risk tools can help address the risk issue
Consumer capturebenefits financialinstitutions:
– Higher consumer retention– Lower processing costs– Decreased acquisition costs– Decreased switching costs– Business customers have a
strong desire for Mobile RDCsolution
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FIS Xpress Deposit Overview• Remote deposit capture (RDC) solution for consumers
and small businesses• Introduced in 2008 as a complement to FIS’ successful
Commercial Capture Xpress merchant RDC solution– 500+ FIs in production, 20,000+ business/merchant
users
• ASP service offering– FI controls all deposit parameters –enrollment, $ and
velocity limits, holds, cutoff times, etc.– FIS manages data center operations, software
development and maintenance, compliance and audits,etc.
• 25 financial institutions in production– 3 top 100 U.S. FIs in production, a 4th preparing to launch– More than 15 awaiting implementation– Approaching 100,000 end users
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FIS Xpress Deposit Overview100% SelfService Deposit Process• No new technology introduced to consumer environment
• Smart phone with downloadable app• PC, browser, highspeed Internet, TWAINcompliant
scanner• TWAIN, introduced in 1992, is an openstandards
interface between image hardware devices (such ascameras and scanners) and image processing software
• Consumer logs in, scans and submits deposits• Institution reviews and approves/declines prior to acceptance
and processing (autoreview of deposits using risk thresholdsavailable)
• Consumer receives notifications after submission andprocessing
• Selfservice archive available for 24 months• Minimal support calls reported among clients
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Xpress Deposit for Smart PhonesHow It Works
Initialize Application Authenticate Photograph Check & Send
Deposit ReceiptConfirmation
Enter $ Amount
Deposits are Processed andExceptions are Reviewed
11 22 33 44
5566
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FIS Xpress DepositSecurity, Risk and Technology Controls
•Security and Risk Controls– Duplicate detection– Singleday and multiday deposit limits– Missing endorsement warnings– Deposit review and approval– Delay customer funds availability based on business rules– Privilegebased user roles and responsibilities
•Technology Controls– Single signon or multifactor authentication– SSL 128bit data encryption for secure Internet communications– Advanced Encryption Standard (AES) utilized for all sensitive client data, images,
X9.37 and ACH files
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Partnerships & Alliances
• FIS Xpress Deposit (FXD) Consumer RDC is an existing FIS offering– Supports scanning via smart phones and TWAINcompliant scanners
• Partnership with mFoundry provides “integrated” mobile banking/mobileRDC offering
– mFoundry manages smart phone app and Mitek serverbased tools validate images– Xpress Deposit is database of record, manages client authentication, consumer RDC
business rules, deposit review and image archive services
• Partnership with Mitek provides “standalone” mobile RDC offering– Leverages Mitek smart phone app, middleware, and server tools– Xpress Deposit is database of record, manages client authentication, consumer RDC
business rules, deposit review and image archive services
• LFI Partner Model –FIS’ Mobile Deposit API supports custom smart phoneapp development
– LFIs develop smart phone apps and Mitek serverbased tools validate images– Xpress Deposit is database of record, manages client authentication, consumer RDC
business rules, deposit review and image archive services
State Farm Bank®
Mobile Banking and Remote Deposit Capture Initiative
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Strategic Directive
• Difficult to make deposits into their depositaccounts.
• Mercatus study:
Convenience&
Accessibility FasterAccessibility
to funds Lower TimeCost
•Mercatus mobile RDC Adoption Research Study wasconducted in December 2009 by Mercatus LLC
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Our Current StateProvide functionality via iPhone, Android, andscanner
165,000 Deposit accounts with $5.1 billion inbalances
11,554 Items submitted
2,753 Depositors
Our Current State
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Our Current State
13,880 Items that had a successful CAR(character amount read)
$6,408,044 Total deposited
80%+ Image acceptance rate
30% Of deposits are made via RDC
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Solution Design
• Beginning to end functionality• The deposit verification
process• The check image capture
process
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Solution Design
• Customerreceives emailconfirming thesuccessful/unsuccessfulsubmission of avalid check
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Enrollment/Underwriting
• Underwriting Criteria:– Qualifile Score– Minimal NSF activity
What is the Industry Sayingabout Consumer RDC?
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Mobile RDCAdoption Growth
Self Service Deposit Channel•Offering affluent customers
extraordinary convenience and service•Checks to consumers are declining at
a slower rate than the overall market•Selfservice deposit channels are
more cost effective than branchdeposits
•Reduce the cost to serve retailcustomers demanding convenience
•Adoption rates among institutions isestimated to reach 20 to 25% by 2012
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Mobile Deposit Going Mainstream
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“Chase’s decision to offer mobiledeposit will force other banks toseriously consider offering theirown app. Because of its nontraditional structure, a lot of bankswere dismissive of USAA. Theycan’t be dismissive of Chase.”
Bob Meara, senior analystCelentJuly 14, 2010
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Mobile Deposit Research Javelin
“One in four consumers findsMobile RDC desirable, and the
most optimal solutions will beintegrated into Smartphone
based offerings.”
Javelin Strategy and ResearchApril 2010
•Javelin’s research finds Mobile RDC canhelp institutions in the following areas:– Consumer retention– Decrease processing costs– Decrease acquisition costs– Decrease switching costs– Business customers have a strong desire
for Mobile RDC solution
State Farm Bank®
Risk Management Program
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Legal & Compliance Risks
• Developed a written customer agreement• Evaluated the legal & compliance risks• Implemented a bankwide RDC policy• Conducted a complete risk assessment with all
applicable stakeholders based on the FFIECguidance.
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Legal & Compliance Risks
• Established daily & weekly deposit limits• Established underwriting enrollment criteria• Established back office & call center controls,
monitoring, and fraud detection• Evaluated overall bank risk
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Lessons Learned•Need Executive sponsor to ensure all keyareas of the bank are aware of strategicdirection
•Executive signoff & regular reporting onproduct performance
•Engage compliance, legal, risk, operations,and product early in development
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Lessons Learned
•Work with auditing to do post implementation audit
•Make it easy for the customer to enroll
•Developed a group specialized toservice customers
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Additional Lessons Learned• Qualification and enrollment options
– Prequalification and target marketing approach– Massmarketing approach with realtime qualification– Target “all” or a subset of online and mobile banking clients?
• Integration considerations– Single signon –online banking and mobile banking– Memo posting– Deposit holds
• Launch considerations– Augmenting your existing mobile banking solution with mobile RDC– Smart phone or flatbed scanning, or both– Pilot vs. FIwide launch– Standalone vs. integrated app offering (with mobile banking and/or mobile deposit)– Call center training and operations– Back office impact/considerations– Realtime image quality analysis (IQA) vs. batch review
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Matt Bowen, FIS
Andrea O’Connor, State Farm Bank
Q&A