Remote check capture, both at bank branches and company offices, has gone from a concept to a competitive edge in banking during the last year.

The major banks have gone from pilots to rollouts, said Steve Buchberger, senior vice president at Wausau Financial Solutions.

“We see banks adding 1,000 new corporations a year and it is growing.” For a small business, a check scanner means that they can deposit checks in a few minutes, instead of sending someone to the bank to wait in line. For large companies, remote capture provides a way to concentrate more of their check processing, no matter how many locations the business has around the country, or around the world.

Even though Check 21 has been around for approximately two years, in just the last nine to 12 months customers have been moving from the analysis mode to the buying mode.

“Many banks are still looking to determine whether they want to be a player,” said Anthony Gandolfo, vice president, group head for deposit services at The Bank of New York. “Those institutions that make the commitment to, and investment in, imaging and fully electronic processing of checks will be in the enviable position to process items in a completely automated, scalable, and cost-effective fashion – similar to their straight-through processing of wire transfers.”

Remote capture is the first new feature in cash management in ages, said Bob Meara, a Celent analyst who previously worked for Alogent, an early leader in check processing.

“Banks have quickly embraced it as a way to acquire core deposits they wouldn’t otherwise get,” he explained. Even small banks are moving beyond taking the deposits just of customers who are loan clients and pursuing business beyond the footprint of their branch network, since they can install a scanner at a client’s distant site and accept check deposits over the Internet.

“Banks are embracing it as a must-have service that their clients are beginning to demand, a revenue-loss avoidance. It is quickly becoming a competitive necessity,” Meara said.

At City National Bank, headquartered in California and with an office in New York, offering remote deposit capture to its business clients is just one example of how the bank listens to its customers, according to Jean Zerrudo, vice president, cash management services. Using a PC, software and a specialized scanner, remote deposit capture allows businesses to scan their checks, then electronically send the images to their bank for deposit processing.

“At first glance, one might assume that remote deposit capture benefits only the larger companies with more checks to deposit,” said Zerrudo. “The truth is, if you’re a small shop with fewer employees in the office, it might be tough to make that trip to the bank, so being able to scan and electronically send your deposit can be of tremendous value and appeal,” added Zerrudo.

Deposit Later for Same Day Credit

With remote deposit capture, City National Bank is able to offer more flexible service to its customers. “Using this service, businesses can send their deposits to us well after traditional banking hours,” Zerrudo said. The bank accepts deposits until 7 p.m. Pacific time.

In addition to the benefit of convenience, businesses can realize a variety of savings using remote deposit capture. When using the service, checks are electronically endorsed and imaged, so companies spend reduced time preparing deposit tickets and photocopying checks. Additionally, scanned data can be integrated into businesses’ accounting software programs, reducing the effort and increasing the efficiency of moving data from one source to another.

Beyond traditional in-office deposits, remote capture is providing solutions to some unique banking needs. One of the bank’s client management firms will be equipping one of their field workers with a scanner and a laptop, so that when the worker visits clients who receive paper checks in the mail, the checks can be scanned and transmitted for deposit to the client’s City National Bank account, which spares everyone a trip to the bank.

Since introducing remote deposit capture in May, using Wausau Financial Services software, City National Bank has seen rapid adoption by its customers. Zerrudo said she is intrigued by the way a tool that was initially developed to assist with teller lines, in-bank deposits, has been enhanced and evolved to accommodate business customers’ scanning of their own deposits.

“This is one of those technologies that banks have rolled out due to high market demand, and it certainly can be a test of how we as an industry have been able to respond,” she said. “To be a commercial bank and to not offer remote deposit capture is a sure, fast way to fall out of market.”

Growing Customer Demand

Denis Bergeron, who manages a team of product managers for remote deposit capture at NCR, said that customers are actually demanding remote deposit.

Meara said that bank after bank reports they are getting calls from customers asking when they can have scanners and start depositing checks electronically.

Vijay Balakrishnan, vice president of strategic marketing at Metavante, which offers both check imaging and check exchange systems, agrees about the sense of urgency.

“In the run-up to Check 21 there was a lot of expectation, a lot of press, and many pilots, but the industry just froze. Now the business is growing fast, standards are in place and if you send someone an image they can do something about it,” he said.

Now that check deposits are not limited by a bank’s footprint, large nationals are threatening local markets and local banks are racing to protect their franchise and also looking at opportunities to take on deposits from remote offices of locally headquartered companies.

“This opens up a completely new competitive landscape,” Balakrishnan said.

Celent analyst Bob Meara agreed that demand is driving adoption and banks can’t wait to get into the game. If they don’t, their competitors will, and competitors may be other banks or third party processors like First Data, who are going after corporations that banks haven’t reached yet. That leaves banks with the more mundane settlement role.

The initial limited growth was due to bank reticence. As a new service, banks weren’t sure what adoption would be. “Check 21 says that the bank which creates the IRD (image replacement document) is responsible for the image quality. The risk was real but overstated, so banks were perhaps overly risk averse but now more and more banks are rolling it out real fast, capture devices are in a backlog because they underestimated demand, big banks are being told it could be eight weeks to fill an order,” Meara said.

Fears about image quality were overblown initially, said Paul Citarella, executive vice president at Alogent. Banks were concerned about the print quality of IRDs and wondered when the industry would have sufficient infrastructure to support electronic processing. With SVPCO and Endpoint Exchange the industry is able to process a substantial number of checks all the way through the system electronically.

“You start to see the benefits of image exchange where a lot of your items can be moved electronically from capture to settlement,” he added, “and that will continue to ratchet up over the two next years as more of the ecosystem is built out.”

St. Louis Bank, which is just one year old, is an example of what remote capture can do to streamline operations. Kim Palmer, the chief operating officer, said the $280 million bank has just one office, in a not particularly convenient location, and a single teller.

The bank was started by a group of officers who left a large banking operation and were intent on not creating one of their own.

“Remote capture is part of our strategy,” Palmer explained. “We put it in every customer who will take it and they don’t care where we are located. We have run into no resistance. They are paying us $150 a month to do our work for us, although we leave that part out when we sell it.”

Many clients have said the service surpasses their expectations, according to Palmer.

“They have an image of their deposits that they never had before, they can create fancy reports, and they can export the data to the accounting systems,” Palmer said.

Palmer was surprised when the hospital across the street adopted it; the bank had expected it would stick to paper deposits since it was so close by. But the hospital has separate accounts for its 26 doctors.

“Remote capture provides a nice, simple way to make deposits and create reports for the doctors. It used to take their bookkeeper hours to prepare deposits; now she doesn’t do any of that because she has access to an image of the item if she needs it. And our teller isn’t tied up for an hour and 45 minutes processing the deposits,” said Palmer.

Customers Save Time, Savor Convenience

Only as remote capture has rolled out have banks learned how many different ways it provides value to their customers, including small businesses that the banks hadn’t thought would be interested, said Celent’s Meara. Some small companies suffered from what Meara calls “desk float,” the cost of keeping checks in a drawer for several days before someone had the opportunity to drop them off at the bank. Others just like the convenience of remote deposit.

“Landscape maintenance people suddenly realize they don’t need to stand in line at the bank before 3 p.m. They can deposit the checks when they get home in the evening and get same-day credit and the comfort of a printed receipt rather than an ATM slip.”

Clients who have a lot of checks find significant savings just from not filling out deposit slips and creating an adding machine tape that has to be checked and reconciled. Instead, they run the checks through a scanner and have the image record the amount deposited automatically. If they need to check a payment in the future, they can find the amount and the image of the check quickly.

Bergeron at NCR said that vendors and banks had expected significant adoption from larger retailers, but the breadth of interest beyond retailing has surprised everyone.

“We see a lot of small businesses who like to do remote deposit because it means they can make deposits without closing down at the lunch hour.”

Dentists and lawyers are also using it and it has been a hit with companies like real estate firms, insurance offices and brokers where the volume of checks might be low but the dollar value high.

At The Bank of New York, remote capture is a way to expand the range of services the bank offers to its corporate customers regardless of where the company has offices.

“Check 21 was a huge enabler – it has let us broaden our reach,” agreed David Cruikshank, managing director and head of international payments and trade services at The Bank of New York, which uses Wausau’s software.

The bank has made remote image capture of checks a part of its larger set of services to customers including corporations, retailers, and fund managers.

“From a North American standpoint, we have a two-pronged strategy,” said Bill Flyge, managing director and head of North America cash management at the bank. “From a commercial perspective, we look at image capabilities as a way to transcend and break down the geographical barriers we face as a national collector of funds.

“In an image-based world we can use technology to overcome geographic challenges associated with handling nationwide deposits, expanding our ability to be a national collector and concentrator of funds for our clients,” he explained. The second part of the bank’s strategy is transitioning to a trust bank relationship with some of the remote image capture customers, by providing middle- and back-office solutions.

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www.stlouisbank.com

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