What is Remote Deposit

Posted on June 15, 2009 | What at mybiginfo.com | What is Remote Deposit | | View all What | |

Remote Deposit

Remote deposit refers to the ability to deposit checks into a bank account from one’s home or office without having to physically deliver the actual check to the bank. This is typically accomplished by scanning a digital image of a check onto a computer, then transmitting that image to the bank–a practice that became legal in the United States in 2004 when the Check Clearing for the 21st Century Act (or Check 21 Act) took effect. This service is typically used by businesses, though a remote deposit application for consumers has been developed. It should not be confused with:

* Direct deposit, which refers to the practice of posting an employee’s weekly earnings directly to his or her bank account.
* Online deposit, which refers to a retail banking service allowing an authorized customer to record a check via a web application and have it posted, then mail in the physical check, giving the customer access to the funds before the check clears in the usual way. While this type of service does not involve a scanner nor take advantage of the Check 21 Act, it is also sometimes called remote deposit.

Remote Deposit Capture often has different names depending upon how the service is applied within a particular environment. These names include “Corporate Capture”, “Merchant Capture”, “Image Deposits”, “Image Cash Letters”, etc. In general, we see the term “Remote Deposit Capture” increasingly used as the catch-all phrase for a family of related products and services. Each of these service family members are related in 1 common way: The service allows for checks to be truncated and cleared electronically.

Recent legislation in the USA commonly referred to as “Check 21” makes this entire process possible. Passed in October 2003 and implemented in October 2004, this legislation allows banks to clear checks based upon images of the original items, instead of having to transport the original check all the way back to the paying bank for clearing. The benefits of RDC can be substantial: convenience, reduced transportation risk & cost, better availability, processing efficiencies, the ability to consolidate banking relationships and more.

Usage of remote deposit

Remote Deposit Capture has been called “The most important development the (U.S.) banking industry has seen in years” by the Federal Reserve and others. Almost all of the RFPs (Request for Proposals) Cash Management groups at the largest banks in the USA receive now request information on this service, and nearly all of the top banks in the USA have either just launched the service, or are well on their way to doing so.

Usage of remote deposit is rapidly expanding: a February 2008 survey by group Independent Community Bankers of America found that 50 percent of banks in the United States were current users of remote deposit, and 77 percent have plan to adopt the technology by 2010.

The commonly-viewed benefits of this new service, referred to as Remote Deposit Capture (RDC), include convenience, better deposit availability and reduced transportation cost & risk. It is important to note that not all solutions are the same. Additional functionality such as Intelligent Character & Document Recognition, data management through business rules, the ability to feed internal systems, intelligent clearing capabilities and many others can further add value to the business case.

Remote Deposit Capture is a must-have product solution most US-based banks are racing to develop and get to market, and a service every corporation or correspondent bank should consider.

Adoption of remote deposit capture by clients is projected to reach the 1 million mark in the next two years, with its base expanding to over 5 million by 2012.[2]

A few financial institutions that currently allow remote deposit include:

* National City Bank
* Bank of America
* BankAtlantic
* California Bank & Trust
* Capital Bank
* The Palmetto Bank
* USAA

The banking industry does not keep an official tally of how many businesses use remote deposit nationwide; however, the number is generally believed to be in the tens of thousands. Several independent companies such as Goldleaf Financial Solutions, BankServ, Diebold, RDM Corporation, Landmark Clearing and NetDeposit claim to have signed up a few thousand customers, although a number of major banks have also developed their own systems and may eventually wind up handling the lion’s share of remote deposit traffic.

The Remote Deposit Capture Process
Depending upon functionality and degree of incorporation into a corporate or bank operations, the Remote Deposit Capture process can range from basic to becoming a part of automated receivables processing platform. In its most basic application, here is an example from a corporate perspective:

1. ABC Corporation receives payments by check in the mail or at their office.
2. ABC Corp. performs their normal Remittance Processing process. This process includes opening the mail, data entry from the payment coupon / control document (application, form, invoice, etc.), data entry from the check (dollar amount, date, account number, etc.), and information uploads to the Accounts Receivables, Customer, and other databases.
3. Checks are then typically provided to the corporation’s treasury area where ABC Corp. prepares a deposit (deposit ticket with total and accompanying checks). This process typically includes counting the number of checks and adding the value of checks at least twice to ensure the deposit is accurate and balanced.
4. With Remote Deposit Capture, instead of physically going to the bank to deposit the checks, ABC Corp. can now scan the deposit ticket and checks using a desktop scanner.
5. Once the check images are captured, an ACH file (for eligible items) and/or an image-based deposit is prepared. The RDC system can then transmit (usually via FTP over the internet as a 128-bit encrypted file) the deposit to ABC Corp’s bank.
6. The Bank receives the ACH file and / or image deposit, posts to ABC Corp’s account and assigns availability based upon an agreed upon availability schedule.

Behind the scenes, the bank has a few different options on how to clear the items. Checks converted to ACH transactions are processed electronically. It is important to note, however, that for any and all checks converted to an ACH, NACHA Rules are adhered to. Effectively, there are two main issues to consider, 1) the writer / depositor of the check being converted must be notified the check is being converted to an ACH transaction, and 2) Not all check are eligible for conversion.

For the non-ACH converted items, the process can be a bit more complex. Unlike what most of the press has scared the public into believing (that checks now clear almost immediately), as of May 2007, less than 25% of checks are cleared as images. How, then does the bank clear items captured via Remote Deposit Capture? By re-printing the images and clearing those re-printed paper documents! These re-printed checks are called Image Replacement Documents (IRDs).

Advantages of Remote Deposits
Accelerated Clearings
Improved Availability
Enhanced Cash Flow from Cash Management Operations
Reduced Return Item Risk
Reduced Transportation Costs / Convenience
Reduced Processing Costs
Consolidation of banking relationships
Reduced Transportation Costs
New Revenue Streams
Reduced Processing and Clearing Costs

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