AN UNCOMMON PERSPECTIVE: REMOTE DEPOSIT CAPTURE - THE SHAPE OF THINGS TO COME

Bank deposits get a makeover as Wachovia leverages Check 21

As companies continue to learn more about Check 21 legislation, they are discovering something remarkable. Beneath the hype, a dramatically different model for commercial banking is emerging, as different from today’s processes as was the shift from branches to online banking in the 1990s.  It is something simply called Remote Deposit Capture (RDC).

Just like Internet technology made it possible for banks to deliver electronic images and data to their clients, the next-generation check clearing architecture turns the tables, allowing commercial and corporate clients to scan checks (themselves or through an outsource provider) and electronically send the images and data to their bank for deposit into a DDA account, with no paper to follow. 

That’s right: no more daily bank runs and no more paper trails.

The ability to electronically submit check deposits creates a new class of automated, electronic deposit preparation and settlement that can eliminate the transportation of paper deposits, as well as the need to list check amounts for deposit.  Banking will become even more tightly connected to the way companies do business, allowing customers to electronically consolidate deposits from distant office locations into one centralized account. Ultimately RDC helps to improve cash flow and reduce multiple bank relationships.  And deposits no longer will be tied to branch hours for current-day processing.  What’s more, RDC provides corporate clients a low-cost entry into electronic banking.

Remote Possibilities

The technology and business process movements that fuel this next-generation deposit scenario have been percolating for some time.  For instance, RDC will encompass image cash letters, a process whereby customers use their own imaging equipment to generate a transmission of images for deposit.  But it’s Check 21, and the check-presentation improvements the legislation affords, that will create the profound new landscape in which companies will bank.  Corporations adopting an in-house Check 21-compliant IT and operations infrastructure will realize substantial reductions in operations and staffing costs, and participate in a streamlined form of check depositing that will offer significant value.

The good news is that much of the investment commercial and corporate clients have made in the past five years in image processing applications and related hardware may yield greater dividends as part of this deposit flow.  With Wachovia’s RDC, checks can be scanned at the client’s site using their existing image software and hardware technology.  For clients that don’t have an existing image infrastructure, Wachovia can provide a turnkey image solution chosen by the bank. Plus, Wachovia’s RDC solution can accept images and data from outsource providers that process checks on behalf of corporate customers.

How It Works

In the coming wave of electronic banking, check processing will move away from centralized bank operations centers to the offices of the corporate clients.  Here’s how.  Customers will use image technology to produce electronic deposits. Before transmitting the deposit, the customer will balance the deposit dollar amount to the sum of the checks, ensuring accuracy and reducing the chance of adjustments. The deposit then is electronically transmitted to Wachovia through the Internet, and the customer receives an acknowledgement of receipt of the deposit transmission.  The customer truncates the original checks for destruction or retention.

Once Wachovia receives and acknowledges the image transmission, it settles the deposit, checks for image quality and verifies the DDA account number.  The bank then determines the appropriate clearing channel – image presentment via image exchange or printing of substitute checks – assigns float to the deposit and posts the deposit to their DDA account.

RDC will have broad market appeal across businesses within both corporate and commercial market segments with low-volume, high-dollar deposits in single or multiple offices or retail locations in industries including insurance, healthcare, property management and brokerages.  

As image exchange ramps up over the next two years, RDC will increasingly appeal to high-volume cash letter clients.  With Accounts Receivable Conversion (ARC) likely to continue as the product of choice for high-volume remittance clients that receive consumer payments (i.e. credit card issuers and utilities), companies will be interested in integrating both ARC and RDC solutions into their payments strategy.  In this scenario, companies can convert eligible checks to an ACH transaction, based on UCC regulations, and use an image-based system and RDC to process the remaining items as substitute checks.

Increasing Demand

RDC promises commercial customers the ability to affordably electronify check presentment to streamline their operations and significantly reduce costs and improve productivity. This proposition already has generated considerable buzz in the lead-up to Check 21.  Demand is sure to take off as Check 21 matures.  As such, Wachovia is taking a leadership position with Check 21 and image exchange initiatives, building on the bank’s reputation for leadership in transaction technology.  RDC is an excellent example of the shape of things to come.

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