February 16, 2008

Image Check Deposits

Posted in finance tagged , , , , , , at 7:26 pm by Jon Symons

If you dread going to the bank and standing in line to deposit a simple check, you’ll be happy to hear about the latest innovation in the financial industry. Digital deposits, or remote deposit capture is a method for consumers and small businesses to deposit checks remotely, from a home or office for example, using an image scanner. Simply upload a check image to your bank’s website, and presto, the funds are in your account.

What Makes Digital Deposits Possible?

scannerIn 2004 US legislation known as “Check 21” made it unnecessary for banks to handle the physical checks in order to clear the financial transaction. These transactions could now be completed based on images of checks. The bill was passed in order to make the banking system, specifically around check clearing, much more efficient as the need to physically transport the checks between banks would be eliminated.

Companies like CheckFree quickly recognized the opportunity to extend this new legislation to the benefit of the consumer so they began developing solutions that would enable banks to offer remote check image scanning on a wide scale.

Image Check Deposits Step by Step

From the user’s point of view, it is actually a very simple process that requires only a standard computer, an Internet connection and a scanner which is built-in on most modern Inkjet printers.

  1. You receive a check that you want to deposit.
  2. You simply scan the front and back of the check on your home scanner.
  3. Log in to your bank’s secure online banking website.
  4. Visit the remote deposit page of their site.
  5. Enter the basic information about your check: routing number, amount and date.
  6. Upload the images of the front and back of your check with a few clicks.
  7. Verify the deposit once the images are shown back to you.
  8. Your bank then completes the process electronically or in cases where the check is not compatible with electronic clearing systems, the check is reprinted onto paper and cleared the old fashioned way.

It’s really that simple. For trusted clients, some banks will instantly credit the funds to their account. For others there may be a small delay, but certainly no longer than an “in person” check deposit.

The Pros of Image Check Deposits

  • Safety – you eliminate risk of losing or having the check stolen in transport to the bank.
  • Speed – banks should be able to process check transactions quicker when they come to the bank in electronic format.
  • Time – this deposit can be done in a couple minutes without having to get into your car and drive to a bank and stand in a long line.
  • Freedom – you are no longer tied to your bank. If you move to a new city, you could keep your bank even if it is hundreds of miles away.

What are the Potential Pitfalls?

  • Security – just like any other bank transactions, this will attract attention from potential fraudsters, which will probably deter some people from using check images.

Digital image check deposit or remote deposit capture represents a major innovation in the banking industry and passes along a huge set of benefits to the consumer. Currently only about 20% of banks are offering this service, but recent surveys suggest that almost 90% of business clients (and probably almost as many personal clients) said they would use it when it comes available. If you deposit checks on a regular basis it is worth inquiring if your bank is offering this innovative check cashing feature, and if not letting them know that you would appreciate it being available.