Most businesses probably have heard of remote deposit capture, a service that allows companies to scan checks and transmit the scanned images directly to their bank. The service became available after October 2004, when the federal government implemented Check 21, which allows banks to clear checks based upon images of the original items instead of having to physically transport the original check to the paying bank for clearing.
Now offered by more than half the local banks, remote deposit capture is growing in popularity and one day likely will be as widely available as online banking. Now that this service has been available for three years, businesses may wonder whether they should consider using it. What are the benefits and risks of remote deposit capture and which businesses should really use it?
Any business with a personal computer, an Internet connection, a check scanner and a service provider (such as a bank) can use remote deposit capture. Businesses simply take the checks received at the business and scan them to transmit them digitally over an encrypted Internet connection to their bank. The bank will accept the deposit and post it to the business’ account.
The benefits of remote deposit capture include convenience, reduced transportation risk and cost, processing efficiencies, and the ability to choose a bank that isn’t in the immediate neighborhood.
In addition, remote deposit capture extends a business’ deposit time to later in the day because checks need not be physically delivered to a bank branch. This saves time and money because it is expensive for employees to travel to the bank and wait in line at a branch. It also eliminates the need for courier service. In addition, businesses have the ability to upload deposit information directly into their accounting software, saving additional time and avoiding possible mistakes caused by having to re-enter data.
The businesses have access to the checks via an image archive, making it unnecessary to photocopy each check, something many businesses still do.
No matter how convenient remote deposit capture is for some businesses, it’s not for everyone. It really is a major change for how businesses handle deposits, and businesses considering it should evaluate all the possibilities and requirements.
We don’t recommend remote deposit capture for retail businesses that process many small transaction checks. It fits best for customers making deposits every day or several times a week, such as an insurance broker, a law office or for doctor and dentist offices, and perhaps would even work for a small clothing boutique or construction company. These are small to medium-size businesses that typically deposit no more than 200 checks each day.
Before offering remote deposit capture to a business, a bank will conduct a risk assessment (as they would for a loan or direct payroll deposit) to make sure the business’ back office is secure, the bookkeeping is up to standards and that deposits are handled safely and securely.
The business’ computers must be secured with proper firewalls and virus protection. And the business needs to have a secure way to store paper checks for a minimum of 30 days — and then to securely destroy them.
Other issues to consider include check-image quality. It is important that checks are scanned properly to ensure the digital image is good enough to read once it is retrieved. Businesses also must be prepared to make sure checks are not duplicated. Any party that converts an original paper item into an image must guarantee that it is not entered more than once. If checks are scanned or deposited again, the business could be held legally liable for any or all consequential damages.
For the right business, remote deposit capture can save significant time and cost. But it’s important for those businesses to determine beforehand if this is right for them and whether they have the safeguards in place to prevent fraud and misuse of the system.
Jessica Wilkie is vice president, cash management officer at EvergreenBank. She can be reached at 425-670-9898. EvergreenBank, which has a branch in Lynnwood, recently launched its own remote deposit capture system for existing and new customers.
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