Remote deposit

Last updated

Remote deposit or mobile deposit is the ability of a bank customer to deposit a cheque into a bank account from a remote location, without having to physically deliver the cheque to the bank. This was originally accomplished by scanning a digital image of a cheque into a computer then transmitting that image to the bank, but is now accomplished with a smartphone. The practice became legal in the United States in 2004 when the Check Clearing for the 21st Century Act (Check 21 Act) took effect, though banks are not required to implement the system.

Contents

This service was originally used primarily by businesses with dedicated check scanners, but with the spread of smartphones and mobile banking it is now common in consumer banks.

History

Remote deposits became legal in the United States in 2004 when the Check Clearing for the 21st Century Act (or Check 21 Act) went into effect. The Act is intended in part to keep the country's financial services operational in the event of a catastrophe that could make rapid long-distance transportation impossible, like the September 11, 2001, attacks. The Check 21 Act makes the digital image of a check legally acceptable for payment purposes, just like a traditional paper check.

Before 2004, if someone deposited a check in an account with one bank, the banks would have to physically exchange the paper check to the bank on which the check is drawn before the money would be credited to the account in the deposit bank. Under Check 21, the deposit bank can simply send an image of the check to the drawing bank. This reduction of the transportation time from total processing life cycle of a check provides a longer time for the corporation to process the checks, allowing for later deposits and faster check clearance. [1]

Initially remote deposit capture (RDC) was used primarily by businesses. Check scanners were priced between $250 and $2,500 and were either purchased by the business or rented from the bank. These businesses were also often required to pay monthly fees or maintain a minimum account balance to reduce the risk of fraud. Businesses were screened by the bank to determine the risk of fraudulent checks and bounced checks, and they were audited by the bank to ensure proper check handling and disposal. [2]

On July 4, 2009, Element Federal Credit Union (formerly WV United FCU) [3] ) became the first financial institution to deploy a smartphone app for mobile check deposit. USAA closely followed the launch of a mobile application in collaboration with Mitek Systems in August 2009. [4] Several other banks began accepting mobile deposits in the early 2010s as the technology became more popular. [5] Mobile Deposit allows smart phone users to snap a picture of the check with the phone's camera. The application automatically processes the picture and sends it to the bank for deposit. The customer does not mail in the original check, instead voiding or discarding it. [6]

In 2013 the United Kingdom government proposed a similar digital cheque imaging law allowing mobile cheque deposit, which was put into place in 2014. [7] [8]

In 2020 Wells Fargo bank was ordered to pay $102.8 million in damages to USAA for infringing on mobile check deposit patents developed in 2008. [9]

Use

Remote deposit use has grown. A June 2009 survey by the Independent Community Bankers of America found that 62% of banks in the United States offered merchant remote deposit, and 78% had plans to adopt the technology by 2011.

Client adoption of remote deposit capture was projected to reach 1 million by 2010, and over 5 million by 2012. [10]

According to an industry study conducted in late 2013, only 10% of U.S. banks and credit unions offered mobile deposits, though many more planned to do so. [11] Research by Celent in 2013 showed that 20 million customers used mobile check deposits in 2013, a growth from 10.9 million in 2012 and 2.2 million in 2011, beating previous estimates. [12]

By 2015 Celent estimated 87 million customers were using mobile check deposits, accelerating the decline of foot traffic to bank branches. [13]

The 2020 Coronavirus pandemic accelerated trends of shifting consumer behavior, further increasing use of mobile check deposits and reducing in person check deposits, contributing to branch closures. [14]

See also

Related Research Articles

<span class="mw-page-title-main">Federal Deposit Insurance Corporation</span> US government agency providing deposit insurance

The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks. The FDIC was created by the Banking Act of 1933, enacted during the Great Depression to restore trust in the American banking system. More than one-third of banks failed in the years before the FDIC's creation, and bank runs were common. The insurance limit was initially US$2,500 per ownership category, and this has been increased several times over the years. Since the enactment of the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010, the FDIC insures deposits in member banks up to $250,000 per ownership category. FDIC insurance is backed by the full faith and credit of the government of the United States, and according to the FDIC, "since its start in 1933 no depositor has ever lost a penny of FDIC-insured funds".

<span class="mw-page-title-main">Commercial bank</span> Financial institution

A commercial bank is a financial institution that accepts deposits from the public and gives loans for the purposes of consumption and investment to make a profit.

<span class="mw-page-title-main">Transaction account</span> Bank holding that clients can access on demand

A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share account at credit unions, is a deposit account or bank account held at a bank or other financial institution. It is available to the account owner "on demand" and is available for frequent and immediate access by the account owner or to others as the account owner may direct. Access may be in a variety of ways, such as cash withdrawals, use of debit cards, cheques and electronic transfer. In economic terms, the funds held in a transaction account are regarded as liquid funds. In accounting terms, they are considered as cash.

Cheque clearing or bank clearance is the process of moving cash from the bank on which a cheque is drawn to the bank in which it was deposited, usually accompanied by the movement of the cheque to the paying bank, either in the traditional physical paper form or digitally under a cheque truncation system. This process is called the clearing cycle and normally results in a credit to the account at the bank of deposit, and an equivalent debit to the account at the bank on which it was drawn, with a corresponding adjustment of accounts of the banks themselves. If there are not enough funds in the account when the cheque arrived at the issuing bank, the cheque would be returned as a dishonoured cheque marked as non-sufficient funds.

The United Services Automobile Association (USAA) is an American financial services company providing insurance and banking products exclusively to members of the military, veterans and their families. It was founded in 1922 in San Antonio, Texas, by a group of 25 U.S. Army officers as a mechanism for mutual self-insurance, when they were unable to secure auto insurance because of the perception that they, as military officers, were a high-risk group.

<span class="mw-page-title-main">Check 21 Act</span> U.S. law allowing checks to be digitized

The Check Clearing for the 21st Century Act is a United States federal law, Pub. L.Tooltip Public Law  108–100 (text)(PDF), that was enacted on October 28, 2003 by the 108th U.S. Congress. The Check 21 Act took effect one year later on October 28, 2004. The law allows the recipient of a paper check to create a digital version of the original, a process known as check truncation, into an electronic format called a "substitute check", thereby eliminating the need for further handling of the physical document. The recipient bank no longer returns the paper check but electronically transmits an image of both sides of the check to the bank it is drawn upon.

<span class="mw-page-title-main">Online banking</span> Internet-based financial transactions

Online banking, also known as internet banking, virtual banking, web banking or home banking, is a system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution's website or mobile app. Since the early 2000s this has become the most common way that customers access their bank accounts.

<span class="mw-page-title-main">Cheque</span> Method of payment

A cheque is a document that orders a bank, building society to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The person writing the cheque, known as the drawer, has a transaction banking account where the money is held. The drawer writes various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay the amount of money stated to the payee.

In economics, float is duplicate money present in the banking system during the time between a deposit being made in the recipient's account and the money being deducted from the sender's account. It can be used as investable asset, but makes up the smallest part of the money supply. Float affects the amount of currency available to trade and countries can manipulate the worth of their currency by restricting or expanding the amount of float available to trade.

<span class="mw-page-title-main">Mobile banking</span> Service provided by a bank

Mobile banking is a service provided by a bank or other financial institution that allows its customers to conduct financial transactions remotely using a mobile device such as a smartphone or tablet. Unlike the related internet banking it uses software, usually called an app, provided by the financial institution for the purpose. Mobile banking is usually available on a 24-hour basis. Some financial institutions have restrictions on which accounts may be accessed through mobile banking, as well as a limit on the amount that can be transacted. Mobile banking is dependent on the availability of an internet or data connection to the mobile device.

<span class="mw-page-title-main">Interac e-Transfer</span> Canadian money transfer service

Interac e-Transfer is a Canadian funds transfer service between personal and business accounts in participating Canadian banks and other financial institutions, offered through Interac Corporation.

<span class="mw-page-title-main">Branch (banking)</span> Retail location of a bank, credit union, or other financial institution

A branch, banking center or financial center is a retail location where a bank, credit union, or other financial institution offers a wide array of face-to-face and automated services to its customers.

<span class="mw-page-title-main">Substitute checks in the United States</span> Digital version of a banking check

A substitute check is a negotiable instrument that is a digital reproduction of an original paper check. As a negotiable payment instrument in the United States, a substitute check maintains the status of a "legal check" in lieu of the original paper check, as authorized by the Check Clearing for the 21st Century Act. Instead of presenting the original paper checks, financial institutions and payment-processing centers transmit data from substitute checks electronically through the settlement process, through the United States Federal Reserve System, or by clearing the deposits on the basis of private agreements between member financial institutions. Financial institutions that process substitute checks in accordance with such private agreements are typically members of a clearinghouse that operates under the Uniform Commercial Code (UCC).

In banking, a lockbox is a service offered to organizations by commercial banks to simplify collection and processing of accounts receivable by having those organizations' customers' payments mailed directly to a location accessible by the bank.

<span class="mw-page-title-main">Bank</span> Financial institution which accepts deposits

A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.

Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC, is a full-service bank with branches statewide. Founded in 1959, Nevada State Bank serves 20 communities across the state of Nevada. Zions Bancorporation, N.A. operates in nearly 500 local financial centers across 11 Western states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington and Wyoming. Zions Bancorporation, N.A. is included in the S&P 400 Mid-Cap and NASDAQ Financial 100 indices.

National Payments Corporation of India (NPCI) is an Indian state-owned organization that operates retail payments and settlement systems in India. The organization is an initiative of the Reserve Bank of India (RBI) and the Indian Banks' Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust payment and settlement infrastructure in India.

Mobile payments is a mode of payment using mobile phones. Instead of using methods like cash, cheque, and credit card, a customer can use a mobile phone to transfer money or to pay for goods and services. A customer can transfer money or pay for goods and services by sending an SMS, using a Java application over GPRS, a WAP service, over IVR or other mobile communication technologies. In India, this service is bank-led. Customers wishing to avail themselves of this service will have to register with banks which provide this service. Currently, this service is being offered by several major banks and is expected to grow further. Mobile Payment Forum of India (MPFI) is the umbrella organisation which is responsible for deploying mobile payments in India.

Simple was an American neobank based in Portland, Oregon. It was recognized as the first neobank and operated between 2009 and 2021.

Mbogo, Ethan (2014-09-03). "USAA and Mitek Settle Lawsuit". GlobeNewswire News Room. Retrieved 2023-11-29.

References

  1. ↑ "Federal Reserve Board - Frequently Asked Questions about Check 21". Board of Governors of the Federal Reserve System. Retrieved 8 December 2022.
  2. ↑ "Remote Deposit Capture: A Primer". www.fdic.gov. Archived from the original on 2 November 2022. Retrieved 8 December 2022.
  3. ↑ WV United Federal Credit Union is First with iPhone-based Remote Check Scan & Deposit Finovate Blog, Jim Bruene Posted on July 12, 2009
  4. ↑ "USAA's Deposit@Mobile app puts check deposits a mug shot away". Engadget. Retrieved 8 December 2022.
  5. ↑ Yerak, Becky. "New wave of banking: Check deposit via smart-phone photo". phys.org. Retrieved 8 December 2022.
  6. ↑ Stellin, Susan (2009-08-10). "Bank Will Allow Customers to Deposit Checks by iPhone". The New York Times. pp. B4. Retrieved 14 December 2013.
  7. ↑ "Speeding up cheque payments: legislating for cheque imaging". GOV.UK. Retrieved 8 December 2022.
  8. ↑ "New proposals to make cheque depositing easier and quicker to be unveiled". GOV.UK. Retrieved 8 December 2022.
  9. ↑ "Wells Fargo ordered to pay $102.8M in mobile deposit patent case". Banking Dive. Retrieved 8 December 2022.
  10. ↑ Celent's estimates were published on 4 June 2007.
  11. ↑ Camhi, Jonathan (2014-01-06). "Celent: Banks Looking to Replace RDC Solutions". Bank Systems & Technology. Retrieved 8 January 2014.
  12. ↑ Daly, Jim. "Mobile Devices Capture the Lion's Share of Consumer Remote Deposit Capture Users". Digital Transactions. Retrieved 8 December 2022.
  13. ↑ "State of Remote Deposit Capture 2015: Mobile Is the New Scanner | Celent". www.celent.com. Retrieved 8 December 2022.
  14. ↑ "Pandemic pushes customers out of branches, banks ramp up closures". www.spglobal.com. Retrieved 8 December 2022.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.