Remote deposit

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Remote deposit refers to the ability to deposit checks into a bank account from one's home or office without having to physically deliver the actual check to the bank. This is typically accomplished by scanning a digital image of a check onto a computer, then transmitting that image to the bank--a practice that became legal in the United States in 2004 when the Check Clearing for the 21st Century Act (or Check 21 Act) took effect. This service is typically used by businesses. It should not be confused with:

Direct deposit, which refers to the practice of posting an employee's weekly earnings directly to his or her bank account.
Online deposit, which refers to a retail banking service allowing an authorized customer to record a check via a web application and have it posted, then mail in the physical check, giving the customer access to the funds before the check clears in the usual way. While this type of service does not involve a check scanner nor take advantage of the Check 21 Act, it is also sometimes called remote deposit.[1]

1 Overview of the Check 21 Act
2 Implications for businesses and consumers
3 Usage of remote deposit
4 Footnotes
5 See also
6 External links

[edit] Overview of the Check 21 Act

Intended in part to keep the country's financial industries operational in the event of a catastrophe that could make 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 from one bank (for example, Wells Fargo) into his account at a different bank (for example, Bank of America), the banks would have to physically exchange the paper check before the money would be credited to his account. But under Check 21, one bank can simply send an image of the check to the other bank. The practical effect of the law is that checks can still be deposited and cleared, even if a disaster makes it impossible for banks to exchange the physical paper checks with each other.

[edit] Implications for businesses and consumers

A side effect of the Check 21 act is that, because the digital image of a check is now considered a legal document, bank customers who get paid with a check can scan an image of the check and deposit it into their account from their home or office if their bank supports doing so.

Advocates of Check 21 claim that remote deposit saves time and money because businesses who use it no longer have to send an employee or a courier to take their checks to the bank. Another potential benefit is that it cuts down on paperwork, and therefore reduces the chances of making mistakes or losing checks in the process of depositing them. Bounced checks also show up faster when processed through remote deposit.

Critics contend that remote deposit--and by extension, the entire Check 21 Act--is an attempt by the banking industry to eliminate "float," the standard one- or two-day waiting period between the time someone writes a check and the time the money is actually taken out of their account. Now that checks can be cashed and cleared electronically, it is theoretically possibly for a bank to take the money out of your checking account on the same day you wrote the check. This would make checks behave much like debit cards--making it impossible, for example, to write a check to pay your bill at the grocery store, then rush to the bank to make a deposit so the check doesn't bounce. So far, all banks in the United States still operate with at least a one-day float period.^{[citation needed]}

[edit] Usage of remote deposit

Remote deposit has not yet come into widespread use: A December 2005 study by the non-profit group Independent Community Bankers of America found that just 4 percent of banks in the United States were current users of remote deposit, although 41 percent have plans to adopt the technology by 2008.

Usage of remote deposit is rapidly expanding. As of early 2007, nearly a third of all US banks had adopted RDC solutions, according to financial research firm Celent. Over 2,900 financial institutions have implemented or are in the process of implementing remote deposit through March 2007, corresponding to some 112,000 scanners. Celent estimates that over 4,000 institutions will have solutions deploying nearly 250,000 devices by the end of 2007.

Adoption of remote deposit capture by clients is projected to reach the 1 million mark in the next two years, with its base expanding to over 5 million by 2012.^[1]

A few financial institutions that currently allow remote deposit include:

First Regional Bank
Bank of America
BankAtlantic
California Bank & Trust
Capital One Bank [2]
Citibank
Commerce Bank
Commerce National Bank
Fifth Third Bank
First Republic Bank
Frost National Bank
JPMorgan Chase
MBank [3]
National City
PNC Bank
TCF Bank
The Palmetto Bank
U.S. Bank
USAA [4]
U.S. First Credit Union [5]
Valley National Bank
Washington Mutual Bank
Wachovia Bank
Wells Fargo (also offers this feature to consumers using special ATMs) [6]

The banking industry does not keep an official tally of how many businesses use remote deposit nationwide; however, the number is generally believed to be in the tens of thousands. Several independent companies such as Alogent, BankServ, Diebold, RDM Corporation, and NetDeposit each claim to have signed up a few thousand customers, although a number of major banks have also developed their own systems and may eventually wind up handling the lion's share of remote deposit traffic.