Primer: Remote Deposit Capture

What is it?

On a basic level, it is simply a way for corporations to take the checks they receive from clients, customers and business partners and send those checks electronically to their bank without having to physically take the checks to a branch.

From a bank’s perspective, it is much more. Most customers will make their deposits at the nearest branch for safety and convenience. But when checks can be sent in remotely over a secure Internet connection, banks can capture a much greater share of their customers’ business.

How does it work?

In October 2003, Congress passed the Check Clearing for the 21st Century Act (a.k.a. Check 21), which lets banks use electronic images of checks as legal documents. Instead of having to transport the original check back to the paying bank for clearing, banks could accept an electronic image of the check.

In its most basic form, here’s how the process works:

  1. A company receives checks by mail or delivery.
  2. The company performs its normal processing, including opening the mail and entering data from the check (dollar, amount, date, etc.) into its accounts-receivable system.
  3. Checks are prepared for deposit.
  4. The checks are loaded into a check scanning device, provided by manufacturers such as Unisys and Canon.
  5. Using software on the desktop, or a hosted offering from banks such as Wachovia and Arizona-based First National Bank Holding Co., companies can transmit electronic images, usually as a 128-bit encrypted file, over the Internet to their bank.
  6. The bank receives the file, inspects it for image quality, errors and duplications, and begins sorting the checks for clearing. Because fewer than 20% of banks currently have remote deposit technology, most resort to reprinting the images and passing them on to the corresponding bank or automated clearinghouse (ACH). However, Lee Madden, senior vice president of image services for Wachovia, expects the adoption rate to be close to 80% by 2008.
  7. Once a deposit confirmation comes from their bank, companies can store or dispose of the paper checks as they see fit.

What are the benefits?

“For the average business, it typically means [companies] can get access to their money a day faster,” says John Leekley, an industry analyst and chief executive of Alpharetta, Ga.-based In addition, remote deposit capture technology lets corporations more closely integrate their check clearing processes with their financial systems, reducing processing time and costs. Remote deposit capture also allows banks to reduce processing time and handling costs.

How much does it cost?

The most expensive piece of the technology is the check scanning device, which ranges from about $800 to $3,500. Companies can buy software from their banks or another vendor, or opt for a hosted online version; leading vendors include Metavante, NetDeposit, Alogent and Fiserv. This service costs about $30 a month, plus a per-item fee of 10 to 20 cents.

What are the hurdles?

Some businesses are concerned about the safety and security of depositing checks electronically. That concern is easing, however, as more companies adopt remote deposit capture. A bigger hurdle is changing internal processes. Some retailers, for example, have found it challenging to hand over the responsibility for scanning and then storing checks to individual store managers. As Madden says, “We’ve had to explain that it’s not really an additional thing—it’s a different thing.”