By Joe Lockwood
Hot, hot, hot! That’s the word on Remote Merchant Deposit from big banks, consultants and system vendors. In fact, remote merchant deposit can be a powerful opportunity for community banks looking to expand their services beyond the retail customers’ household needs.
Remote deposit is a simple product concept. Instead of the business customer leaving his/her business during the day to deposit checks at the bank, the checks can be scanned at the office and resulting check images transmitted for deposit. The business receives quicker credit without having to interrupt work to drive through inclement weather or navigate the community bank’s “lunch crunch” to deposit paper checks.
The technology behind remote deposit is much the same as branch image capture. Check 21 legislation enables a check image to replace the physical check for payment. Now, vendors are flooding the market with remote deposit solutions that take advantage of the new image capabilities.
Instead of diving into the technology, let’s focus on which businesses might benefit by scanning their check deposits. Some businesses, such as insurance agencies, property managers and landscapers, are ideal for remote deposit because most of their payments arrive in the form of checks. Others businesses, such as restaurants and gift shops, are less ideal because they receive cash and plastic cards most of the time. Cash requires courier, and courier keeps the business’s costs up.
So remote deposit is not for every business. It’s also not for every customer. Because the technology involves checks that could be scanned or deposited twice, the business must prove its ability to minimize risk before taking it on. A good measure is the automated clearing house (ACH) test. If a customer’s business is clear to send and receive ACH items, then it’s probably a good candidate for remote deposit.
Risk experience has been good thus far. There are approximately 100,000 remote deposit scanners installed at businesses today, three times the number one year ago. Of all the checks flowing through those machines, fewer than 1 percent have been questionable, according to Bob Meara, senior analyst with Celent.
Systems on the market today can detect duplicate check presentments as far back as 365 days and can monitor duplicates arriving at the bank via other channels, such as the ATM or teller line. New fraud filter and “positive pay” technologies will continue to close opportunities for check fraud – through this and all other channels.
So, yes – remote deposit is do-able. The more important question: Is it right for your community bank?
Big bank competitors hope to earn fee income from remote deposit while cementing relationships with their business customers. Bank of America now processes 850,000 remote deposit checks a month from 1,500 locations. KeyBank advertises the advantages of extended hours for accepting remote deposits. Sovereign Bank talks about the security of its On-Site Check Deposit product.
More importantly, these banks are positioning remote deposit as a way for businesses to eliminate relationships with additional financial institutions outside their footprint, since geography is no longer a barrier for deposit processing. The Aite Group reports that Bank of America now offers Electronic Invoice Presentment and Payment (EIPP), with the intent of deepening small-business relationships and generating additional fee-based revenues. Aite says other banks are likely to follow Bank of America’s lead.
To combat the big bank competition, community banks will need to focus on their sweet spot: meeting the full range of customer needs. One opportunity might be in integrating the check scanning software with business accounting solutions to increase the effectiveness of remote deposit services. Another might be EIPP.
Ask your current business customers how your bank can increase the convenience of its business services. Do they need to retrieve check images? Reconcile their items issued against items paid and invest the difference in overnight funds? Compare expenses against budget on a daily basis? Automate their loan payments when deposited funds reach a target level? Your customers need more than just remote deposit.
One or more of these services may perfectly demonstrate your bank’s support for its business customers. Today’s businesses are already thinking beyond deposit runs. The convenience of remote deposit will soon fade into yesterday’s novelties without additional capabilities.
Christine Barry, research director with Aite Group, said “Small businesses already spend approximately $353 billion on financial products. By cross-selling additional services such as EIPP, banks will not only increase that spending, but they will better meet the needs of this important customer segment.”
As your bank considers its remote deposit system options, ask your management team the following questions:
• Can the proposed solution be scaled to meet the needs of different businesses?
• Does the solution integrate with other desirable business solutions, such as image retrieval, accounts receivable and sweep processing?
• Will the cost of the solution exceed your bank’s ability to price it? If so, is that
Answering these questions can bring you closer to understanding the value of the solutions before you, as well as the overall proposition of offering remote capture services to your business customers. u
Joe Lockwood is senior vice president and chief technology officer at COCC. He is responsible for the quality of COCC’s technical operating environment, as well as the company’s technology plans. For information about COCC’s Remote Deposit solution, please contact Tony Doucette at (877) 678-0444, ext. 250.