Should Banks Charge Fees for Mobile RDC?

Mar 14th, 2013 | Posted by
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Last week, the Chicago Tribune broke a story that PNC was considering charging fees for its mobile remote deposit capture (RDC). The story prompted this action even though I have previously commented on the topic.

Should banks charge for mRDC, especially when data suggests many consumers would be willing to pay? Heck no! Why leave money on the table? At least three reasons.

  1. First, the train has already left the station. Hundreds of US financial institutions now offer mRDC and that number will likely double in the next year. RDC is quickly becoming a staple mobile banking capability and all but two financial institutions offer it free of charge. To my knowledge, only First Tennessee and US Bank have fees associated with mRDC.
  2. The revenue opportunity is uninteresting. Most mRDC users deposit just a few checks per year. The math varies by bank because of varying degrees of small business usage among other things. But, if the annual average per registered user is ~20 checks per year (optimistic to say the least), a $.50/check fee would net just $10/year per customer.
  3. As Bank of America can attest, the risk associated with introducing new fees in today’s hyper sensitive environment clearly outweighs the likely revenue gain.

Banks would do well to invest in ways to attract and retain valuable customers instead of ways to increase fee income. In retrospect, banks have done it to themselves (again) by missing the revenue opportunity early on. But, two years into market maturity is no time to start. But there is a larger, more interesting question the Chicago Tribune article invites. Should banks charge for services that save it money?

The article asserts PNC saves $3.88 per transaction because mRDC deposits cost less to process than do teller transactions. True enough (perhaps) – theoretically. But banks won’t realize any net savings through RDC until branch channel costs are reduced as transactions migrate to self-service channels. In this regard, most US banks have a long ways to go.

More importantly in my opinion, is that positioned properly, bank products should have little to do with the cost to serve. Instead, products and services should be priced based on demonstrable perceived value, not cost-to-serve. There are countless examples of successful products that enjoy comparably elevated product margins. Here are a few:
  – Starbucks Hazelnut Macchiato
  – Crest Pro-Health whitening toothpaste
  – Folgers Decaffeinated coffee
  – Tropicana Orange Juice with Calcium
  – Virtually every “option package” ever sold with an automobile

In each of these cases, products were positioned based on a unique value proposition that had precious little to do with the products cost of goods. Let it be so in retail banking also.

  1. Tim
    Apr 26th, 2013 at 04:30
    Reply | Quote | #1

    My bank, US Bank, charges a $0.50 fee for remote deposits. I feel that remote deposits should be saving banks money, so they should allow such deposits free of charge.