BS&T: What do you mean when you say remote deposit capture is a "disruptive" technology?
Kunz: Disruptive to us means that a customer may be willing to switch providers over a technology. Customers in the midmarket segment especially pick a bank based on where they can make deposits and the bank's willingness to lend. Creating new ways of doing either of those can be disruptive.
BS&T: Doesn't remote deposit capture level the playing field between small and large banks?
Kunz: There is a bit of a paradox going on. You could argue that it levels the playing field, but we are finding that the customer is saying it's still important to have that physical location. Third-party research also suggests that smaller banks are finding it a little more difficult to compete in the electronic space, especially in the small-business market. BAI [Bank Administration Institute; Chicago] published research that small businesses are willing to switch banks over payments services. All of this is changing the game.
BS&T: Is it true that the financial services industry is unable, or perhaps even unwilling, to make the leap to fully electronic processes?
Kunz: I would say that it's not true. Financial institutions are dealing with the investments we need to make to convert paper to electronic, as well as with investments in innovative electronic services, in a fairly disciplined manner. You can't afford to do it all at one time.
There may be a perception that the industry is unwilling because of the debates around how to convert the check world to the image world. We are less effective as an industry in converging to a single image platform and now have different networks. I have to ask why we are doing that with the payments system that is declining the fastest.
BS&T: How far are we from achieving straight-through processing of payments?
Kunz: At PNC, we are well on our way to full electronification by payment type, but it's still mostly by silo. We are skeptical that any of us will get to the point where there is one railroad that routes payments by least cost.
Equally important, though, is straight-through processing by customer. We are far away from that, although we do see increasing willingness by our business customers to integrate payments with their payables and receivables processes. I see increasing evidence that the consumer/small-business market would like more integration with its business processes.
We have to stay centered not only on what technology can do, but also on customer needs. If the business case for payments electronification across businesses can be supported by more efficiency, or by helping customers reduce their costs or by providing them with enhanced payment information, then we'll move there. But I'm not sure we're seeing that.
BS&T: Where will the payments industry be in the next two to five years?
Kunz: We're obviously in the very mature stages of electronic consumer-to-business payments. Debit cards are the proof point on that. I also see a continued maturing and acceleration of the consumer-to-consumer payments space with emerging conveniences, such as mobile commerce, becoming more important. Account-to-account payments will enable consumer-to-consumer electronification and will reduce the barriers to switching banks because we are allowing customers to open accounts and make deposits in real time.
The competitive environment will mean that it won't be good enough just to be better than the other bank because our competitors include innovative technology companies that know how to market. Our challenge is to leverage the great parts of being a bank -- the trusted brand and the payments franchise -- but become better at technology and marketing than the new entrants. Our business models are being tested. Standing still is losing. **--Lisa Valentine