Posted by Andrea Rovira in Untagged
By Matthew Gniech, product manager, Check Image, Cummins Allison
As many maintain, remote deposit capture was originally deployed as a customer retention product following Check 21 legislation being signed into law. In 2004-2005 banks offered RDC, although the infrastructure and image-clearing network necessary to clear checks electronically was, at best, in its infancy. What is not up for argument is that the bridge solution for this gap-printing nearly all items as image replacement documents to continue and complete the clearing process-was painful. The practice was overall wasteful in process, time, and especially cost, but was competitively necessary as all of the larger banks began offering this revolutionary deposit enhancement to retain and grow market share.
Ironically, the situation has flipped as financial institutions now have the enhanced infrastructure and image-clearing networks necessary to clear all but a few specific item types electronically. But although remote deposit capture has been around for nearly eight years, many customers remain hesitant to convert, leaving untapped capacity and significant potential for growth.
To complicate matters further, financial institutions cannot continue to accommodate their large paper-based depositors as they have in the past. The paper-based clearing mechanisms the industry developed over decades continue to be dismantled. Much like the Federal Reserve Bank, scores of banks are closing their large centralized item-processing centers as they deploy more distributed capture models. All of this creates a sort of disconnect between the commercial paper-based depositor and the financial institution that would prefer to maintain the relationship without having to push commercial deposits into their retail branch network.
So why hasn't RDC been more widely adopted, given the infrastructure is now in place? Why do clients continue to bring paper deposits to the bank when electronic deposits are quicker and more cost effective?
One of the challenges to adoption includes the limitations of check-scanning equipment in terms of sacrificing speed for quality or vice versa. The desktop check scanners offered in the past have been slow and sometimes cumbersome-unable to handle large check volumes. While the software applications have evolved, the scanning technology has not stayed on pace. In many situations, checks simply are not available until late in the day, and even though RDC deposit deadlines are often extended past traditional paper deadlines, there still is not enough time for the depositor to make same-day cutoffs.
A complementary technology solution is available now that can assist financial institutions in transitioning their paper depositors to electronic. This solution is a win for the customers who have yet to realize typical advantages of electronic deposit, such as extended deadlines, lower per-deposit and item fees, and potential transportation savings, without jeopardizing their process. The solution also helps the financial institutions-allowing them to comfortably continue the migration from their legacy paper based systems to the more-efficient processes.
In an effort to address these gaps, many financial institutions are expanding their acceptance of commercial image cash letter deposits. ICL deposits are another mechanism that enables customers to deliver a deposit to their financial institution. Unlike RDC-which is a bank-offered product that is entirely administered by the bank and restrictive to large depositors-ICLs were designed for high volume and do not require the financial institution to play an "active" role in the creation process. The bank must simply offer their customers the ability to submit their ICL deposit and confirm receipt. Image cash letter deposits complement RDC while empowering customers to take a proactive role in choosing a solution that fits their specific needs.
Unfortunately, until now there have only been a few ways for their clients to effectively produce ICL deposits, often requiring large and expensive traditional item-processing equipment or slower low-volume check scanners. These solutions are often paired with separate software packages not always ideally suited for use by retailers, merchants, or other commercial clients.
By embracing ICL deposits as a complement to RDC, financial institutions have another solution to increase customer retention while expanding deposit growth potential. RDC-resistant clients will be interested in this alternative, as it offers a more streamlined process and does not sacrifice quality for speed. While there are various solutions, one that we offer has the ability to process, image, and tally both checks and currency on a single device paired to a single user interface, creating a seamless solution for retailers and other businesses that accept both forms of payment. Financial institutions benefit in two ways: (1) a high-speed, end-to-end electronic treasury solution for their clients, and (2) the ability to offer a service to customers that many larger banks do not, creating a competitive advantage. It's a huge win-win.
In order to maintain and grow the base of commercial deposit clients, financial institutions need to offer an alternative to RDC that satisfies more of their clients' needs. Recent technology breakthroughs make these services more affordable and practical, including scanning and imaging deposit items at 400 documents per minute, making the move to electronic deposit processing viable for even the most check-intensive businesses. This same solution creates and sends the ICL deposit to their bank, simplifying the effort for both parties. It can also process and record currency at 1,600 bills per minute, providing a true multipurpose solution.
Financial institutions exploring commercial ICL deposit technology should look for a simple and intuitive ICL solution that is easy to install and can start generating a positive impact quickly. An experienced partner will assist in the implementation process by installing the hardware and software for proper testing without taxing internal resources. By offering this alternative, financial institutions now have a turn-key solution for clients that have been resistant to electronic processing. Commercial ICL deposits are the next wave of innovation that can help financial institutions operate and compete even more effectively.
[This article was posted on February 25, 2013, on the website of ABA Banking Journal, www.ababj.com.]