Is Remote Deposit right for your firm?

June 13, 2008

Some have called Remote Deposit “the most important development the U.S. banking industry has seen in years.” More importantly, its impact on your firm has already occurred in ways you might not have noticed - the reduction of check clearing times and, hopefully, the improvement of funds availability at your bank. But, there’s another side to Remote Deposit that is getting more attention lately.

Remote Deposit

One of the many benefits to come out of the implementation of ‘Check 21′ legislation in 2004 is the introduction of scanning technology to convert check deposits into images for transmission to your depositing bank. Banks are allowed to clear checks based upon images of the original items rather than physically moving the original checks all over the country to the paying bank for clearing.

The first stage of implementation allowed banks to start clearing the checks their customers deposited with them through imaging. Banks quickly determined that deposits could be scanned at the point of origination, eliminating the bank branch as the middleman.

In the last year the technology has become more widely available allowing businesses to take over the scanning function and deliver check images to their banks for clearing. How does it work? Basically, a small scanner is connected to a desktop in your office and you log onto a Web-based service that will walk you through the process of scanning your checks directly to your bank. You no longer need to take your check deposits to the bank (cash can not be scanned), deposit tickets are eliminated and you usually have until at least 5:00 p.m. to complete the transmission of the deposit - a big improvement over the normal 2:00 p.m. deposit cutoff that many banks still have at their branches. The original items must be stored for a recommended 60 days in case the Fed needs to replace a “non-conforming” or unreadable image.

As is typical with the evolution of most treasury management services, this technology was originally used by larger companies in cooperation with the mega banks serving them. What has been remarkable is the very rapid acceptance of the technology so that today many smaller banks offer a form of the service to their middle-market clients. The emergence of the business-only bank has been fueled in part by the processing changes made possible through Check 21. No longer does a successful, growing bank need an expensive branch network to gather deposits if their focus is only on businesses and not on consumer banking.

Today, banks of just about any size will offer a form of Remote Deposit service but some more proactively than others.

Has your bank mentioned the service to you or have you heard about it through the grapevine? That might depend on you bank’s perspective - are they proactive and update you on new services or do they take a more reactive, ‘let the client bring it up’ approach? Some banks have started offering Remote Deposit seemingly out of self defense! It seems that they are not yet comfortable including this service in their toolbox of treasury management services.

But with so many banks offering a version of Remote Deposit we sometimes forget to ask if it’s really the right service for every firm. Not every office needs the latest and greatest gadget. And sometimes comparing apples-to-apples to ensure that your firm is getting the best deal becomes a challenge as you start to compare bank services. There are some important questions to ask yourself and your bank as you consider implementing Remote Deposit. Here are some questions you might ask your bank:

* Are there monthly fees associated with Remote Deposit? Can the fees be analyzed against the balances in our account?

* Do I have to buy the scanner, and if so, what kind of replacement guarantee comes with it? Can we get a free trial period to ensure that we like the service?

* What kind of implementation support can I expect and is there any ongoing customer support for the service in case I run into problems?

* How long have you offered the service and how many of your clients are using it? Can you give my office a demonstration of the service?

* Can I scan money orders through your service?

* Can I review a copy of the service agreement that you’ll want me to sign?

Secondly, but no less important, you need to think through the impact of incorporating Remote Deposit into your firm’s workflow since your staff will, in essence, take over the function of a bank teller:

* Who will handle the scanning process and do we need dual control?

* Do we have a secure place to store the original items for the recommended 60 day period (if the image isn’t clear the Fed will request a copy)?

* Where will we set up the scanner; how many people will need access to it (large firms may need multiple scanners)?

* What reporting options would I like the service to provide and is it compatible with my business or case management software?

* Are the benefits great enough to justify the upfront cost of the scanner and the ongoing monthly bank fees that our bank charges?

* Are there low-tech alternatives that might better serve my firm?

One of the most important things to do is ask for a demonstration of the service from each of the banks you’re considering. Have them walk you through the screens and discuss in detail how their service is unique - they should be able to describe how the features will benefit your firm. The demonstrations should include scanning test checks so that you can see the scanner in action, particularly how to handle checks that aren’t being scanned correctly. Be sure to include a knowledgeable staff person in the meeting so that they can ask questions about the day-to-day issues that can arise with deposit processing.

Your bank should be experienced enough in Remote Deposit to be able to provide an in-depth level of consulting and be willing to give you a free trial to test-drive the service for at least a few weeks.

If you’re having a hard time justifying Remote Deposit you might want to investigate alternatives. For example, if you’d just like to eliminate the daily trips to the local bank branch then consider banks that come to you. Is there a “business-only” bank in your area that offers an in-house courier to pickup your deposits? Many of these banks also have non-traditional 5:00 p.m. deposit deadlines.

Watch Out! Evaluating whether Remote Deposit is right for your firm can quickly lead you to conclude that it may be a good time to review your day-to-day banking in general.

DeAnn Pangburn is vice president/client development officer at Paragon Commercial Bank in Richmond. She can be reached at dpangburn@paragoncommercial.com.

Written by DeAnn Pangburn  |  Filed Under Office Practices 

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