For all the hullabaloo that mobile remote deposit capture generated this year, the availability of the service has been limited to a few banks' customers.

But that is expected to change in 2011 as banks seek to further differentiate their mobile and online services.

In pushing mobile, banks are challenged to come up with uses that show their customers how such services are unique and whether they are safe, said Mark Schwanhausser, a senior analyst at Javelin Strategy and Research in Pleasanton, Calif.

"This is one of those features that addresses that first problem of, 'Why do I want to use my mobile phone in banking?' " Schwanhausser said. "The industry is looking for those kinds of examples where people say, 'Ah, this is better, this is different than online banking. This saves me time.' "

"I put mobile deposit capture in that category," he said.

Mobile remote deposit capture entices financial institutions because it could further drive customers to self-service channels and away from more costly branch services — the same rationale that drove many banks to invest in online services. "Because mobile remote deposit obviates the once vital function of depositing paper checks, financial institutions with a high deposit-to-branch ratio should make this capability a top priority," said an April report by Javelin.

Overall, Javelin predicted that mobile remote deposit would be "a niche product ideal for smaller institutions with few branches or ATMs" and that large institutions would roll out the service for competitive reasons.

"The four biggest financial institutions in the U.S. — Bank of America, Chase, [Citigroup Inc.'s] Citibank and Wells Fargo — compete by offering optimal services to their mobile banking customers," the Javelin report said. "If one of the four major banks offers the solution, it is likely a domino effect will occur with other banks rushing to provide the solution to prevent deposit flight."

To date, a small handful of banks are actually live with a mobile remote deposit feature, including USAA Federal Savings Bank, JPMorgan Chase & Co. and State Farm Bank.

Jack Stephenson, the managing director of mobile, e-commerce and payments at JPMorgan Chase, would not disclose specific use figures for its QuickDeposit service but said adoption has been "well in excess of our expectations."

Gary Brand, the director of source capture optimization at Fiserv Inc., said that this enthusiasm has spread to other banking companies.

Though JPMorgan Chase is not a customer for Fiserv's mobile remote deposit system, its advertising has "really done wonders for our business," said Brand. Fiserv has two customers that are pilot-testing its mobile remote deposit platform, according to Brand, who would not name them.

"We have a host of contracts that have been completed and committed to but are not in production yet," he said.

In November, JPMorgan Chase released a mobile banking application for smartphones using Google Inc.'s Android operating system. The app includes the bank's QuickDeposit mobile check deposit feature that made a splash when Chase released it for its iPhone mobile app users in July.

PayPal Inc., the alternative payments unit of eBay Inc., added remote deposit capture in October to its iPhone application and says it plans to add it to its Android app next year.

Mobile remote deposit is the only way PayPal users have to fund their accounts with a paper check.

"The biggest piece that our customers were telling us is, 'We want more ways to add funds to our accounts,' " said Avin Arumugam, the senior product manager for mobile at PayPal.

Also this year, several large vendors, including Fiserv, Jack Henry & Associates Inc. and Fidelity National Information Services Inc., agreed to offer mobile RDC to their bank and credit union customers using patented imaging technology from Mitek Systems Inc., whose software has been largely responsible for spreading the service.

"We talk about it as a pivotal or inflection point whereby there will be broader adoption going into this new year," said James DeBello, the president and chief executive of Mitek in San Diego. "2010 for us was a year that allowed us to secure all the major channel partners … who have an interest in extending into mobile RDC."

For banks that are on the fence about the service, consultant Todd Ablowitz points to the use numbers early adopters have released.

"We've certainly seen a great response by the consumers who have gotten an opportunity at the few banks they can," said Ablowitz, the president of Double Diamond Group LLC in Centennial, Colo.

Customers of USAA Federal have deposited 2.6 million checks, totaling $1.6 billion, since it began offering the service for iPhone users in 2009, a spokeswoman for the San Antonio bank said.

More than 200,000 members in the past three months have used its Deposit@Mobile service, which is also available to its Android app users, she said.

Users of PayPal's iPhone app deposited $100,000 worth of checks into their accounts in the first 36 hours the service was live, starting on Oct. 6, according to a spokeswoman. In less than a month they had deposited $1 million.

Schwanhausser said it is too soon to say how many banks and credit unions could go live with a mobile remote deposit service during 2011. Despite its buzz, the service is something that financial institutions cannot rush into, he said.

Banks must evaluate which mobile phone types they want to target and ensure that customers understand how to use the service and that it actually works.

"It is going to take a little bit of time," Schwanhausser said. "You can't just throw these things out there and assume that people will figure it out."

For companies that already offer a mobile remote deposit service, the next step is to improve the user experience, Ablowitz said.

For example, it can take up to six days after capturing a check using the mobile service for funds to appear in a PayPal customer's account. Ablowitz said banks could work to speed that up.

A PayPal spokeswoman said the company has no plan to change its service's processing time but that it is "always looking for feedback and will continue to make improvements as we see fit." It often takes three to four days for funds to appear in a customer's account after a check is captured with a mobile phone, she said.

This story has been reprinted with permission from American Banker.

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Corrected December 30, 2010 at 9:23AM: yes