When Check 21 was passed, E*Trade knew it wanted to be an early adopter of remote deposit technology, said Michael Tinley, the company's product manager for remote deposit.
"Our initial approach was a proof of concept implementation of the Alogent remote deposit solution in a low cost, low risk environment," he said during an Alogent Webinar earlier this month. "To keep the initial cost down and the risk minimal, we initially elected to do a print of IRDs (image replacement checks) on the back end, and they were then captured through our conventional item processing workflow."
The low cost phase was successful, and E*Trade is now working on an interface to the back-end system so it can reap the operational and economic benefits of straight-through processing. The company is working on implementing the solution in all its financial centers.
Other Alogent customers explained how they are managing the technology. In the case of remote deposit technology, financial institutions can allow clients who handle many checks to take advantage of the technology by giving them hardware for capturing and transmitting check images. The hardware works in conjunction with downloadable software.
NetBank will inventory and manage the hardware as it inventories its merchant hardware currently, and has made arrangements for hardware support, said Sonja Kennedy, NetBank's vice president of operations.
"The support structure will be the same as merchant support - 24 hour replacement and we have been in contact with our technicians in the field for merchant support to also support this hardware," Kennedy said, adding that its early days, so processes could change in the future.
Meanwhile, one of the biggest issues with remote deposit is that of image quality, particularly in relation to how it affects a bank's warranty risk.
"Once a financial institution takes an item and creates an IRD they take the warranties on that item. Pushing that out to the customer creates more of an issue because if the image quality is not there, if there are issues with that item, the warranty is on the financial institution and we do not have the original item to go back to," Kennedy said.
In addition to selecting quality software, financial institutions will have to decide what to do when for some reason an image is of poor quality.
"We will solve image quality at the front line, where the customer will have to re-image or will have to mail the original to us at that point," Kennedy said, adding that the bank is not ready to start allowing customers to make corrections to images.
Many of the early adopters are optimistic about the technology's potential for opening doors.
"Customer proximity to a brick and mortar branch really becomes less of a factor. This opens up new customer opportunities," said Carolyn Markowski, vice president of global payments and cash management and remote deposit product manager for HSBC USA.
Added Robert Coyan, vice president of marketing and operations for Corporate One Federal Credit Union, potential savings include reduction in costs related to printing, handling, storage, sorting transportation costs and back-end processing. Meanwhile, he notes, with employees taking fewer steps to process checks, there is more time for interaction and sales at the branch.
"And, earlier entry into the payment stream will result in early clearing, problem resolution opportunities and early entry into the stream will also result in earlier fraud detection," he said.