Insurance and Banking & Finance and Government and Technology

Banks quick to embrace remote checking: Customers get on board as more institutions allow checks to be scanned, transmitted, deposited electronically

March 19, 2007

ATMs are still convenient, but not much of a novelty anymore. That distinction now belongs to remote-deposit capture-a high-tech advancement that guarantees a big payoff for banks and their customers alike.

"From a technological standpoint, it's the biggest thing happening in banking in 2007," said Lee Wetherington, senior vice president at Brentwood, Tenn.-based software maker Goldleaf Financial Inc.

Remote-deposit capture eliminates the need for businesses to physically deposit checks at their bank branch. Using the new technology, checks are scanned and transmitted electronically, not only saving trips to the bank but also speeding up deposits and improving short-term cash flow.

"It's much less stressful," said David Day, president of locally based employee benefits firm Management 2000, which recently began using remote-deposit capture with Sky Bank. "It saves a lot of time at the end of the day."

Most banks require customers to purchase the small desktop scanner, which costs about $225, and pay monthly and transaction fees while they use it.

Steve Sweitzer-accounting manager at locally based manufacturer and Key Bank customer King Systems Corp.-has found the convenience well worth the costs.

"It takes literally three to four minutes to scan the checks and they're off to the bank to start the clearing process," Sweitzer said. Funds can be available up to two days sooner, giving business owners much greater peace of mind, he added.

Security is another key issue, noted Stephanie Delks, director of central business operations for The Care Group LLC, a local physicians group that banks with Fifth Third Bank of Indiana.

"When you're sending someone out in their car to go to the bank, you're incurring some liability there," she said.

Federal legislation enacted in 2004 paved the way for remote-deposit capture. Since the Check Clearing for the 21st Century Act, also known as Check 21, became law, banks and their customers have been quick to embrace the streamlined system.

A survey conducted earlier this year by the American Bankers Association showed that 16 percent of community banks already offer remote-deposit and another 42 percent plan to launch the service this year or next.

At Bowling Green, Ohio-based Sky Bank, which acquired Union Federal Savings Bank last year, more than 100 remote deposit customers have been added in the past five months, according to Senior Vice President Charles Kelly. While any business that regularly collects checks can take advantage of the service, "the ideal user is a retail merchant or commercial client with large volumes of daily deposits," he said.

In the ABA survey, respondents said professional businesses, service firms, contractors, retailers and municipal governments are most likely to be interested in the service. American Partners Bank, headquartered in Maryland with Carmel operations, is planning to offer remote deposit to insurance companies that deposit large quantities of premium checks, Operations Vice President David Sewell said.

Remote deposit-currently available just to business customers-is expected to become so widespread that many bankers see it as an "essential survival strategy," the ABA reported in its February survey.

"I think I would agree," said Chuck Crow, president of Noblesville-based Community Bank. "In the next year to 18 months, it will be just like ATMs were 25 years ago."

Community Bank, which operates 11 branches in Hamilton and Madison counties, rolled out its remote-deposit program this month. Crow hopes the capability to deposit checks remotely can help the bank cast a wider net for customers and spur overall growth.

"We have a lot of customers that do a lot of loan business with us who aren't close enough to do their daily banking," he said. "This will give us the opportunity to have a more complete banking relationship with our loan customers."

It's that ability to break down geographical barriers that makes bankers so enthusiastic about remote-deposit capture and so determined to be on the leading edge, according to Goldleaf's Wetherington. "Deposits are no longer geographically defined. Now, any community bank can service deposit relationships across the country.

"It's an all-out land grab for deposit relationships," he said.

Some banks have been more content to take a wait-and-see attitude with remotedeposit capture. The National Bank of Indianapolis is just now looking at the feasibility of such a program, said Mike Riddle, first vice president and manager of treasury management. "Being first isn't necessarily a huge advantage. It's allowed us to sit back a little and see how this is unfolding."

The bank offers a courier service for its clients' deposits, and will continue to do so after it implements the remote technology.

"It's not something we feel we have to have to be competitive, but we like to have a full menu of services," Riddle said. "It's just an option for your clients."

As with most new technology, it's an option that poses some potential risks, though most say they are minimal. Chief among the concerns are the fact that the original check stays with the bank's customer after it is scanned and processed, raising the possibility that it could be deposited elsewhere or stolen.

Besides technological safeguards, the best way to prevent fraud is familiarity between banks and their customers.

"From our perspective," Crow said, "we want to be dealing with very reputable deposit relationships."

At Fifth Third Bank of Indiana, which has been offering remote deposit for two years, customers are advised to keep checks two to four weeks, said Barbara Tully, vice president of treasury management services for the commercial division.

"It rests on the customer who uses the devices to keep the checks secure," she said.
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