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Remote Deposit Capture for Business – A Must-Offer

By Larry Middleman, President/CEO of CU Business Group, LLC

Adoption of remote deposit capture (RDC) has come a long way in the past few years. Over that time, the mobile banking revolution has fully taken hold, with smartphones becoming virtual extensions of consumers’ identities. As part of that revolution, mobile RDC (mRDC) became mainstream, and it is now a given that financial institutions offer the service to their members/customers.

Many financial institutions recognize the urgency of this task.  According to Celent’s 2017 report, State of Remote Deposit Capture: The Final Stretch, more than 2,600 U.S. financial institutions went live with mRDC in the last two years.

Isn’t it time for your credit union to offer this critical service as well?

Why Must You Offer RDC?

Saves Time and Money. JPMorgan Chase, in announcing the closing of 5% of its retail branches in 2015, claimed that it realizes a 95% cost savings on every check deposited remotely, versus one processed by a branch teller. Your credit union may not realize such dramatic savings, but it is indisputable that the costs in terms of time, payroll, and branch overhead are significantly reduced when check processing is pushed closer to the end-user.

Your member benefits as well. Time-strapped business owners cannot afford to leave their operations for even a moment to drive to the credit union branch. With RDC, check deposits take far less time and effort, and can be done at the member’s convenience, rather than during “banking hours”. Businesses are free to make deposits more quickly and frequently, improving check clearing times and cash flow.

RDC also benefits the environment by minimizing wasteful trips to the credit union branch, saving gas, and reducing harmful emissions.

Eliminates Geographic Barriers. When competing against much larger banking institutions with branches and ATMs on every corner, electronic services like RDC are ways to even the playing field. Thanks to today’s internet-based technologies, any credit union business member can enjoy the same convenient and speedy account access as with Bank of America. With RDC and other remote banking channels, geography and location are no longer the critical service differentiators they once were.

An Opportunity to Earn Additional Fee Income. Although free mobile check deposit has become common-place among consumers, the additional features that business clients require means that there are still opportunities to charge for services.

Yet high fees may be discouraging commercial clients from adopting feature-rich desktop RDC services. It is important for credit unions to keep the cost factor in mind, particularly as they target down-market into the huge and potentially lucrative SMB sector.

According to Bob Meara, as senior analyst with Celent and the report author, “A low cost and easy to sell mRDC solution appropriate for SMBs is the missing ingredient.”

By offering mRDC, credit unions build stronger, “stickier”, and ultimately more profitable relationships with their business members.

Provides Access to Reams of Member Data. One the most interesting developments in mobile RDC technology over the past few years is its built-in data collection capabilities. For credit unions, the opportunity to mine valuable member data is every bit as important as the payment or check deposit itself.

Transactional data contains a treasure trove of information on your member’s behavior, useful both in managing fraud risk as well as highlighting opportunities to provide better service and address your member’s specific business needs.

What Are the Key Considerations for Rolling Out RDC?

Mobile vs. Scanner: It used to be a simple equation. Mobile device check deposit technology was originally designed strictly for consumers or the simplest, low-transaction business use, as one-at-a-time check scanning is too time-consuming and unwieldy for purposes of depositing a heavy volume of checks.

However, mobile RDC solutions that meet the needs of commercial and small business members much more effectively have recently been introduced. New features allow businesses to submit multiple checks in a single batch, and can even support multiple users working remotely in the field.

Still, mobile RDC is not the right choice for every business. According to industry experts, traditional desktop scanners are still much more effective for high check volumes; say more than 5 or 10 checks at a time. High-volume scanners save business members significant time and a lot of aggravation over snapping one-at-a-time photos on a mobile device.

Risk Management: The risk of fraud is one key reason why many financial institutions have waited to roll out an RDC service offering. The threat is real, but recently reported trends have belied many common perceptions of risk.

According to RemoteDepositCapture.com’s 2016 State of the Industry report, banks and credit unions surveyed suffer a duplicate check loss rate of just 0.0104% on mobile check deposits. The study also stated that 76% of financial institutions surveyed reported no direct mobile RDC losses, and 92% believe that the benefits of mRDC outweigh the risks and costs of the program.

“RDC solutions, when paired with sound risk management policies, actually deliver more data and protections than traditional, paper-based check solutions,” says John Leekley, founder of RemoteDepositCapture.com.

With built-in tools such as geolocation and biometric scanners, smart phones are giving banks and credit unions the ability to identify unusual geographic and psychographic patterns, and prevent fraudulent transactions before they occur. For instance, your credit union’s fraud detection department may recognize a mobile device in California depositing a check from a New York-based bank to the account of a member based in Virginia. You now have the opportunity to contact your member to confirm that the transaction is legitimate. Old-school mail deposits provide no way to spot these types of suspicious transactions until it’s too late.

Access to Tech Support and Staff Training: Having technical support available is imperative to a successful RDC program. Your business members will undoubtedly have questions and problems will arise. It is important to consider up front whether the credit union or the vendor will provide first-line support. Even if the credit union is the first line of defense, it is a big learning curve for staff, so ensure that you have adequate vendor support and training from the get-go.

Such training should go beyond the member contact center and technical areas, however. Credit union branch and business development personnel are the keys to effectively pitching the benefits of RDC to current and prospective business members. Ask yourself these questions before rolling out your RDC service: Who will do the training? Which credit union department will maintain ownership of the service? How does RDC fit into your credit union’s strategic goals and marketing plan?

Gone are the days where RDC is a “nice to have” product. Member expectations have developed to the point where every financial institution must offer at least one, if not several versions of the platform to serve their various target markets. Don’t get left behind in the mobile RDC revolution!

Deepening Business Relationships Through Payments

By Melissa Giddens, CTP, AAP NCP, SVP, Consulting Business Leader, WesPay Advisors

Most businesses have a need for financial services above and beyond a loan and basic deposit account. Whether the business’ need is online and mobile banking or extends to ACH or wire payment origination services, businesses of all sizes are placing greater importance on the ability to maximize payables and receivables, mitigate the risk of fraud, and leverage information to make cash flow decisions. Credit unions need to have the resources and skills required to help their business members thrive.

Offering payment solutions can help meet the needs of business members, but also generate non-interest income for a credit union. Businesses pay for value perceived, therefore charging a fair and competitive price for payment services can help a credit union serve its field of membership and cover the costs for providing the services. Meeting the needs of businesses from a payments perspective can contribute toward retaining existing relationships, winning new business and creating a ‘stickiness factor’ that lends itself toward long-term, satisfied business members. It’s a win-win situation for a credit union.

Below are a few tips to keep in mind when working with businesses:

  • Lead with a conversation. Make it your mission to learn as much as you can about a business prospect before discussing your product offering. Talk to them about their business and make the focus all about them. Ask them how their current account and service structure is working, what efficiencies would benefit them, if their clients are requesting new payment options, etc. Taking the time to understand what’s working and what needs to be improved upon with their current provider can provide invaluable insight into how your credit union could meet those needs before ever mentioning a single product.
  • Drill into their payments needs. Get the prospect talking. Ask a wealth of questions to understand how they are utilizing payments in their business. How are they managing payroll, vendor payments, employee reimbursements, etc.? Conversely, how are they being paid from their clients? And, keep drilling down. If they receive a healthy number of checks, how are they depositing those checks into their account? Are they going into a branch, using a courier, leveraging remote deposit, etc.? And, are they receiving the information they need to reconcile transactions, manage their cash flow, etc.? What type of reporting do they need? Are they concerned about fraud? The more you understand a business prospect’s payments needs, the better positioned you’ll be when delivering a tailored proposal and ultimately, servicing the relationship.
  • Become a trusted advisor. Relationships with businesses extend beyond the services a credit union provides. Continually look for ways to add value for your member. Share an article on fraud prevention that may be meaningful for them along with a personalized note, send industry updates that pertain to past conversations you’ve had with them, etc. Let them know you’re thinking of them and keeping them in mind as you come across new information or resources. Create an environment where they look to you as their financial resource.
  • Do your homework. Research your prospect to understand their line of business, key company leadership, new initiatives they’re tackling, recent awards they’ve won, etc. and comment on what you’ve learned during meetings. Congratulate them on a new product they’ve launched or an industry award they’ve earned. Demonstrate that you’re prepared and that you’ve done your research. Prospects can tell when a potential provider shows up unprepared, so don’t give them a reason to question whether or not your credit union is the right fit for them.
  • Master the little things. Follow up timely. Do what you say you’re going to do. Send thank you notes or emails. Write down important takeaways you hear during the discussion, such as birthdays, a dream vacation they’re about to take, etc., so you can send them an annual birthday card or ask them how their trip went during your next conversation. Servicing businesses starts with building a relationship with the people you’re interacting with, so going the extra mile to demonstrate you were listening goes a long way toward building trust.

Working with businesses is an exciting opportunity for a credit union, as a business’ needs are continually evolving. Businesses look for a true financial partner to guide them through the changing financial landscape and how new products coming to market, regulatory changes, economic considerations, etc. may impact their organizations. When it comes to payments, selling solutions to businesses provides another opportunity for credit unions to shine in servicing the needs of its communities.

Melissa Giddens is the SVP, Consulting Business Leader for WesPay Advisors, a consultancy helping organizations advance their development and deployment of electronic payments. Prior to joining WesPay Advisors, Melissa worked with businesses for over 21 years to help build optimal structures for managing payables and receivables, mitigating the risk of fraud and maximizing cash flow. In 2016, she won the Frank E. Zima Payments Advocacy Award and has won numerous sales awards throughout her career. Melissa earned her Master of Business Administration from Green Mountain College. She holds the Certified Treasury Professional (CTP), Accredited ACH Professional (AAP) and National Check Professional (NCP) designations. Contact Melissa at mgiddens@wespayadvisors.com or 415-373-1180.

Two people shaking hands

Five Keys to Growing Business Deposits – One Credit Union’s Story

By Larry Middleman, President/CEO

Credit unions are looking to build long-term, meaningful relationships with their business members. Leading business lending credit unions realize that a robust, comprehensive deposit program is often the best way to capture the full relationship of larger, more sophisticated operating businesses.

At CU Business Group’s 2016 National Business Services Conference in Reston, Virginia, Mike Blosser, vice president of business services with Interra Credit Union presented a workshop on “Reaching New Levels in Business Deposits”.

Mike Blosser, Interra Credit Union

Mike Blosser, Interra Credit Union

Interra Credit Union ($1 billion, Goshen, IN) has long focused on the agricultural sector.  With 16 branches and 67,000 members, the Credit Union was embarking on a new strategic vision to serve 100,000 members by 2019. In support of this vision, Interra’s senior management has identified growing business core deposits as a key to the cooperative’s long-term success.

Yet management recognized that the Credit Union faced several daunting challenges in achieving this objective. The first was deciding how to pivot focus from its traditional reliance on small business and consumer members, to larger companies that had a need for cash management and other higher-end capabilities.

The Credit Union also bumped up against the limited operational and reporting capabilities of its core system, and needed to bridge critical training gaps within the IT and eServices departments, as well as among front-line staff.

Bob Brenneman, Director of Lending at Park View Federal Credit Union ($168 million, Harrisonburg, VA) a CU Business Group conference attendee, sat in on Interra’s session. The topic was timely for his organization.

“We are figuring out where we want to be in a couple of years from now,” Brenneman said. “We need to do a lot of strategic planning, get some expertise, and hire a few more people to make that next step. We want to offer more services to capture the full business relationship because we have just been so focused on the lending side.”

As Interra’s management dove into their project, they discovered five keys to creating a successful business deposits program, including:

1. Implement the right technology

At the time, Interra was in the process of implementing Q2, an omni-channel digital banking solution. The Credit Union specifically chose Q2 because it was built on a business banking platform, a rarity in an industry that often takes a “consumer-first” approach. This gave Interra executives the confidence that Q2 would be able to meet the needs of its sophisticated commercial clients.

The Q2 platform also includes a built-in business online banking solution, eliminating the need to integrate with yet another vendor.

2. Ensure the right product mix

From remote deposit capture to sweep accounts, from positive pay to business online banking, Interra was intent on offering commercial clients a full suite of electronic services to address every current need and anticipate future growth.

Prior to 2014, the Credit Union’s business product mix was extremely limited, including just one checking account and a few services such as a debit card, a business credit card, and online banking services built on the consumer platform.

Fast forward to today, and Interra now offers four distinct analysis checking accounts to address the unique needs of a variety of businesses, a true business debit card, and two types of credit cards (with EMV). The Credit Union also upgraded to a robust business online banking platform, supports online account opening, and offers a full treasury management suite including ACH, remote (and mobile) deposit capture, online wire transfers, positive pay, and multiple user capabilities, all available across a range of devices.

3. Staff for success

In his talk, Blosser stressed the importance of ensuring the team is ready and energized to serve the complex commercial market. Since 2014, Interra has aggressively grown the business services department, which includes a business development manager, a treasury management officer, a business services specialist, two business lending specialists, and a credit analyst. The commercial lending team doubled in size from two to four loan officers.

The Credit Union incentivizes its lenders to keep them engaged and focused on growing the portfolio. However, rewards are based on ongoing portfolio performance and loan quality, instead of sales goals, ensuring that individual and Credit Union motives are fully aligned.

4. Invest in comprehensive training

In the past, the Credit Union’s eServices department handled all new electronic banking setups for business members, as it does for consumer members. Yet without a background in business services, eServices staff didn’t have a strong understanding of business member needs.

Recognizing that business development officers are in the best position to serve business members and capitalize on opportunities to grow relationships, management trained them to set up business members on online banking, remote deposit services, and other treasury management and electronic services. The results: growth in eServices adoption and improving member satisfaction.

Interra also offers training in business products to all employees, allowing the entire team to engage in positive and meaningful conversations with business members with less anxiety.

5. Create positive brand awareness

Once the systems and infrastructure are in place, an expanded product mix is deployed, and key sales and service personnel are trained, it’s time to get the word out. Interra focuses on staying involved in the community, building on the brand awareness developed through its consumer and agricultural business lines, and using easy methods of promotion including posting “Financed by Interra” signage at commercial construction project sites.

 

Interra’s results have been impressive. Today the credit union has 78,000 members.  Business checking and savings accounts have grown by $37 million, bringing total business deposits (including money market accounts and certificates) to a total of $250 million.

Remote deposit capture is now being used at 78 business locations, processing a total of $7 million per month. 130 businesses are using ACH for processing payroll, payment collections, or making vendor payments. Credit card swipes are up by over 500 transactions per month, and over 300 business members are now using the new business online banking platform. Perhaps most impressively, Interra has opened 1,100 new business account relationships since going live with the new strategy.

Park View’s Brenneman found inspiration from Interra’s roadmap, citing Interra’s focus on deep-dive portfolio analysis, and its decision to offer commercial clients a comprehensive business online banking product.

“At our Credit Union, we are at a point where we’ve been all working hard, and we need to make a step to increase our growth trajectory,” Brenneman says. “[This session] provided me with some strategies we can work on to offer a full-service program to our business members.”

Customer Due Diligence

New FinCEN Rules Require Credit Unions to Identify all Beneficial Owners of Legal Entity Accounts

From Claire White, CUBG Deposit Services Officer

On July 11th, new FinCEN rules clarifying and strengthening customer due diligence requirements went into effect. Credit unions will have until May 11, 2018 to comply with the rules.

The new rules contain explicit customer due diligence requirements and include a new requirement to verify the identity of beneficial owners of legal entity customers (i.e. business entity members) with certain exclusions and exceptions.

Under the new rules, credit unions will use Customer Identification Program (CIP) procedures, similar to those used for individuals, to identify the beneficial owners of a legal entity. The credit union may rely on copies of the identification documents used to identify the beneficial owner and may rely on information provided by the entity, as long as it has no knowledge of facts that would call into question the reliability of the information.

Legal entity customers are defined in the final rules as a corporation, limited liability company, or other entity that is created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction that opens an account. Sole proprietorships and unincorporated associations are not included in the definition, even if those such businesses may file with the Secretary of State in order to, for example, register a trade name or establish a tax account.

The final rules also include a list of entities that are not included as legal entity customers under the rules. The exclusions begin on page 17 of the link included in this article.

The final rules define beneficial owners as each of the following:

  • Each individual who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, owns 25% or more of the equity interests of a legal entity customer; and
  • A single individual with significant responsibility to control, manage, or direct a legal entity customer, including an executive officer or senior manager (e.g. a CEO, CFO, COO, Managing Member, General Partner, President, Vice President, or Treasurer) or any other individual who regularly performs similar functions.
  • If a trust owns directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, 25% or more of the equity interests of a legal entity customer, the beneficial owner(s) for the purpose of the final rules is the trustee.

CU Business Group recommends credit unions review their Bank Secrecy Act (BSA) procedures and other procedures related to the opening and monitoring of business accounts to ensure compliance with the new Customer Due Diligence (CDD) rules before May 11, 2018.

We have created the following list of action steps to help you get started:

  1. Review your current account opening, monitoring, and any related BSA procedures for business accounts.
  2. Update the procedures if necessary.
  3. Contact your form vendor regarding a Certification of Beneficial Owner(s) or use the form provided in Appendix A of the Customer Due Diligence Requirements at account opening or when significant changes occur.
  4. Determine which areas of operations will be affected by the changes and provide training to staff.
  5. Inform internal and external auditors of the changes.

You can view the final rules on Customer Due Diligence Requirements for Financial Institutions online.

If you have questions about FinCEN’s final rules on CDD for legal entity customers, contact CUBG’s deposit team at 866-484-2876, or TreasuryMgmt@cubg.org.

Espresso small business

Deposits Key to Becoming Full Service Provider

Deposit services are key to moving your credit union from a transactional lender to a full service financial institution for the businesses in your community.

It all starts with the business checking account but quickly moves through the process of developing and or upgrading your current package of services to a program that best fits your credit union and your members. For example:

  • Business checking accounts
  • Business savings and money market accounts
  • Account analysis
  • Online banking for business
  • Merchant bankcards
  • Business tax payments
  • Remote deposit capture
  • ACH origination
  • Sweep accounts
  • Online cash management
  • Payroll services
  • Managing deposits greater than $250,000

Of course, in assembling this package there are many important considerations to address. CU Business Group can provide the necessary expertise to evaluate these key areas:

  • Your system capabilities – what investments are needed and when?
  • Package products – do we buy it or build it in-house?
  • Volumes – what about businesses with large deposits and high cash/coin usage?
  • Pricing – how do I set appropriate fees that are competitive in my community?
  • Targeting – how do I find the businesses that I am looking for?

For more on CUBG’s deposit consulting, contact us at treasurymgmt@cubg.org.