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Remote Deposit: A Win for Banks, Credit Unions & Businesses

Content provided by IBM-ForwardView eMagazine .

Regional and community financial institutions (FIs) are leading the industry adoption of remote deposit capture (RDC). RDC creates efficiencies inside the FI, helps attract new customers and opens new channels for service. For business customers, RDC offers improved cash flow from more timely, convenient electronic check processing. Learn how to capture the benefits of remote deposit.

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Looking up at the clock late on a Friday afternoon, a merchant realizes she only has a few minutes to get to her financial institution to deposit checks received over the past two days. She drops other tasks and hurries out the door, barely making it in time for the collection of checks to be credited to her merchant account. But while the merchant may sigh in relief once a deposit is made, all the subsequent clearing processes are shouldered by the FI.

Fortunately for financial institutions (FIs) and their customers, the days of last-minute runs to the FI are coming to an end, thanks to remote deposit capture (RDC). These solutions are now used increasingly by banks, credit unions and businesses of all sizes to scan account information and electronically deposit funds immediately.

According to Gary Brand, Director of Partner Programs for CheckFree's global payments technology division, business customer demand for more efficiency is behind the increased popularity of RDC. "What is really driving this in the marketplace is not necessarily significant savings for the financial institution," he says. "It's more demand from their merchants, and their retailers, and their corporate accounts to have this type of capability. It's really a mandate from their business clients more than it is a cost reduction inside of the institution, even though that is an additional benefit for the financial institution."


Conquering mountains of paper opens doors to new growth

RDC makes FIs more efficient by reducing mountains of paperwork and eliminating time consuming, manual processes prone to human error. Unlike physical processing, RDC enables financial institution customers to make deposits remotely throughout the day with a standard computer using point-of-sale (POS) software. The financial institution, for its part, simply receives and processes check information electronically.

RDC facilitates cost-saving measures, too. The Check Clearing for the 21st Century Act, or "Check 21," allows FIs to return digitally scanned copies of canceled checks. RDC solutions frequently provide this capability thereby reducing the expense of housing, then mailing tons of paper to customers. That's more good news for regional and community financial institutions, which can now use RDC to significantly reduce overhead and increase cash flow.

But perhaps the most important benefit for FIs is new growth potential.

CheckFree's Gary Brand notes that RDC helps FIs attract more customers as merchants are likely to give their business to financial institutions that offer RDC because it makes banking services easier to access.

And by eliminating transportation costs and requirements, community and regional FIs can provide services for customers far beyond the areas in which they operate. For example, a regional bank might extend its services throughout a state or province, without being burdened with courier fees.

According to Brand, RDC also offers opportunities for deeper relationships between FIs and their customers, "the ability to provide additional reporting and management of accounts that wasn't necessary with manual deposits, as we go into electronic deposits, the technology allows for some very new and unique management methodologies that the bank can provide as an additional service to its clients."

For these reasons, it should come as no surprise that remote deposit capture is growing in popularity among banks of all sizes and appears to be fast becoming a competitive differentiator in the financial industry. According to a poll conducted by the American Banker newspaper, 58 percent of small banks in the United States have either adopted or plan to adopt remote check deposit by the end of 2008.


Business customers leverage increased bank responsiveness

While FIs gain more efficiency and increase transaction volumes, their business customers can increase profitability through RDC, too. Costs are cut as less time and effort is required to tally checks, balance deposit entries, prepare deposit tickets-and, of course, deliver the deposit to the bank.

Brand explains another driving force behind merchants' adoption of RDC, "a merchant might have multiple [financial] institutions they have to deal with, based upon where they're located geographically.  They might have three different banks that they deal with just because their locations are so geographically dispersed.  And what this allows them to do is consolidate their banking relationships with a single institution instead of having it spread across multiple institutions."

According to a study conducted by the capacity planning software provider Meta Software, remote check deposit has the potential to improve a retailer's access to funds by 54 percent. Losses from returned checks with insufficient funds can also be significantly reduced. The Meta Software study claims these problems can be cut by 20 percent with remote check deposit technologies.

RDC also gives small and midsized businesses (SMBs) more cash flow availability because electronic checks have processing priority over paper checks. And as RDC radically reduces processing time, many banks accept and credit remote deposits long after the branch office is closed. Additional benefits in deposit flexibility are also available to SMBs with RDC, CheckFree's Brand says. "It means the ability to optimize deposits, and deposit types, and the type of float and interest rates that business and consumers can get on their deposits."


Easier implementation thanks to the sophistication of Web services

Remote deposit solutions are often installed and managed at the FI's hosting site, which enables merchants to access information over the Internet, much in the same way many consumers now access personal bank accounts.

The increasing sophistication of Web services supports large numbers of deposits, and enables management tools for both the FI and its customers which allow deposit searches by branch, account history, location and date.


Benefits beyond today

RDC is a fitting response in an era in which most of us expect immediate service and results. Instead of the waiting period many people expect after writing a check, the debit is likely tallied within 24 hours. Not only does this make services such as online banking more effective, but RDC promises to make the last-minute rush to the bank a quaint relic of times past.

As Brand notes, these services are appropriate for more than just retailers. "It's also absolutely applicable for trucking industries, or verticals in transportation, in manufacturing, in distribution, in healthcare," he says of RDC. "There are so many different types of companies and entities that benefit from this type of technology that we're really just beginning to scratch the surface."

Content copyrighted by IBM Corporation.

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