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Remote Deposit Capture Brings Opportunities and Challenges

Posted by Wendell Brock on Mon, May 19, 2008

While Remote Deposit Capture brings many exciting new opportunities to small community banks, it also brings increased challenges.  Even though there are challenges and operational considerations, we must face the reality that the larger banks are aggressively promoting Remote Deposit (Merchant Capture) and targeting our core deposits.  We must position our banks to meet the challenges.  Face the facts, Remote Deposit Capture is here to stay, and will keep growing. The larger banks are aggressively promoting it, and if we offer Remote Deposit, the regulators will be scrutinizing our operational processes.

If Remote Deposit is implemented properly with the basic infrastructure in place, the bank can increase and sustain its core deposits, effectively compete in the Remote Deposit arena, minimize risk and satisfy regulatory requirements.

 If you are considering Remote Deposit, go through the short term pain and implement a program that will sustain the growth.  You may already be offering Remote Deposit Capture, just re-evaluate the program and be sure the infrastructure postures your bank for success while minimizing risk.

 A Remote Deposit operational infrastructure, which addresses program growth, controls, and regulatory requirements include, but are not limited to:

  • Policies, procedures and controls which integrate documentation and processes from the lending department to deposit operations
  • A monitored and perpetuated selling component which gets the same level of focus that loans in the pipeline receive
  • An aggressive bank-wide training program which includes teaching lenders the importance of Remote Deposit as it relates to enhancing banking relationships, building core deposits and retention of business customers
  • Proper staffing of Cash Management Departments to support the day-to-day functions and servicing of business customers
  • Customer evaluation and underwriting process to minimize risk and potential losses
  • Established daily thresholds monitored by operations
  • Review of your blanket bond insurance coverage to minimize liquidity risk, if the bank sustains a material loss from fraud
  • Fraud related security-exception reports to monitor and minimize risk integrated into the operations department
  • Consideration of "holds" on transmitted funds
  • Annual creditworthiness review and audits of customers
  • Perpetual staff training to focus on Remote Deposit Capture features and opportunities to grow the bank and its core deposits
  • BSA Officer review for changes in patterns and trends to minimize money laundering and illicit activity
  • Required regulatory risk assessments of the Remote Deposit Service Providers and the Remote Deposit product offering which is considered an electronic banking product

We have to think of obtaining and sustaining customers while implementing a basic infrastructure to control risk and address regulatory compliance requirements.

With challenges come opportunities when promoting Remote Deposit. The bank will enjoy core deposit growth, sustain their current customer base, reduce lines at their counters, have a potential new source of fee income, be able to compete in the market and have new opportunities to increase loan volume.

Article Submitted by: Carolyn C. Dowdy, President of Bank Project Solutions

http://www.bankprojectsolutions.com/

T: (770) 653 2389

Topics: Community Bank, Commercial Banks, Bank Regulations, Remote Deposit, Bank Staff Training

Major Opportunity for De Novo Banks

Posted by Wendell Brock on Sat, May 03, 2008

According to a recent article by Douglas McIntyre on 247wallstreet a number of large banks are going to be closing branches, which makes good-sense, as the overhead can be a heavy burden. Closing branches for these mega banks is a good idea easing their cash flow and saving them money.

This can be a phenomenal opportunity for de novo bank projects in the industry.

One critical challenge in starting a bank is finding the real estate - some groups spend months, up to a year, to secure the right space. Many of these ‘closed' branches offer an opportunity to obtain ideal locations at lower price points. Depending upon the location you may be able to save quite a bit on your build out as well. Either way, organizers in the de novo market need to move smartly and capitalize on this opportunity

Aside from great locations during this industry adjustment there are going to be great bank employees and many customers searching for greener pastures.

By Wendell Brock 

-------------------------------------------------------
April 28, 2008
Large Banks Beginning To Close Branch Locations (C)(WB)(WFC)(BAC)

Consumers and businesses are faced with two difficult problems as a result of major banks taking huge write-offs. The first is that, even though the Fed is chopping rates, lower interest loans are not making it to consumer or business lending departments. The banks have elected to use the money they get inexpensively from the Fed to improve their own balance sheets. They want to take as little lending risk as possible while the economy is still in trouble.

The other by-product of troubles at large money center banks like Citigroup (C), Wachovia (WB), Wells Fargo (WFC), and Bank of America (BAC) is that closing local branches is a fast way to bring down costs. Doing this without losing customers is somewhat easier because of online banking and ATMs.

Banks in the deepest have already begun the process. Washington Mutual (WM) plans to take out over 3,000 jobs in the short-term and Citigroup has said it will lay-off 9,000. Some of those jobs will be administrative, but these financial firms have huge numbers of people in location through-out the regions which they serve.

Bank of America operates 6,200 branches. Operating a local office can cost $1 million a year when employees, overhead, and rent are factored in. If the bank shuts 10% of its locations it can save over $600 million a year.

Mid-sized regional banks may be under even more pressure to cut costs. National City Corp (NCC) recently reported a huge loss and had to raise over $7 billion. It has eliminated its dividend and must now look for new places to take out costs. Regional bank Peoples recently closed 20 branches in one small section of Connecticut. Banks usually look for locations outside where their core customer "foot prints" are and shutter locations there.

To a large extent banks are willing to let some consumer and smaller business customers go. These groups tend to have high default rates in a recession. Individuals and companies with relatively small revenue often are in no position to weather a downturn in the economy and lending to these groups has already slowed to a crawl.

Businesses which have been under-served by banking institutions are about to see that situation get worse as banks which invested in risky assets try to save themselves from insolvency. Borrowing money has gotten tough, and it is about to get worse.

By Douglas A. McIntyre


Topics: Bank Opportunities, Community Bank, Bank Executives, Commercial Bank

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