Remote deposit
Encyclopedia
Remote deposit refers to the ability to deposit a check
into a bank account
from a remote location, such as an office or home, without having to physically deliver the check to the bank
. This is typically accomplished by scanning
a digital image of a check into 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, though a remote deposit application for consumers has been developed and has begun to be implemented by a handful of banks. It should not be confused with:
Check 21
Intended in part to keep the country's financial industries operational in the event of a catastrophe that could make rapid 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 an 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 the 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.
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, and some advocates, 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 possible for a bank to take the money out of a checking account on the same day a check is used in payment. This would make checks behave much like debit card
s, making it impossible, for example, to write a check to pay a 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.
Client adoption of remote deposit capture is projected to reach 1 million in the next two years, and grow to over 5 million by 2012.
Some financial institutions accept remote deposits via conventional scanner
or smartphone
(versus an MICR scanner). Supported smartphones use operating systems Android by Google, and iOS by Apple (iPhones).
The banking industry does not keep an official tally of how many businesses use remote deposit nationwide, but, the number is estimated to be in the tens of thousands. Several independent companies such as ProfitStars, BankServ
, Diebold
, RDM Corporation, Landmark Clearing and NetDeposit claim to have signed up a few thousand customers, although several major banks have also developed their own systems and may eventually end up handling most remote deposit traffic.
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
into a bank account
Bank account
A Bank account is a financial account recording the financial transactions between the customer and the bank and the resulting financial position of the customer with the bank .-Account types:...
from a remote location, such as an office or home, without having to physically deliver the check to the bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
. This is typically accomplished by scanning
Scanner
Scanner may refer to:* WikiScanner, a tool that provides a searchable database of anonymous Wikipedia edits* A personality type described by self-help author Barbara Sher-Technology:* Scanner , for searching for and receiving radio broadcasts...
a digital image of a check into a computer
Personal computer
A personal computer is any general-purpose computer whose size, capabilities, and original sales price make it useful for individuals, and which is intended to be operated directly by an end-user with no intervening computer operator...
, then transmitting that image to the bank, a practice that became legal in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
in 2004 when the Check Clearing for the 21st Century Act (or Check 21 Act
Check 21 Act
The Check Clearing for the 21st Century Act is a United States federal law, , that was enacted on October 28, 2003 by the 108th Congress. The Check 21 Act took effect one year later on October 28, 2004...
) took effect. This service is typically used by businesses, though a remote deposit application for consumers has been developed and has begun to be implemented by a handful of banks. It should not be confused with:
- Direct depositDirect depositDirect deposit also known as Direct credit is a banking term used to refer to certain payment systems used to transfer money where a payment is initiated by the payer not the payee, namely:* In Europe, the giro system...
, which refers to the practice of posting an employee's weekly earnings directly to his or her bank account. - Online depositOnline bankingOnline banking allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society.-Features:...
, 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 scanner nor take advantage of the Check 21 Act, it is also sometimes called remote deposit.
Check 21
Intended in part to keep the country's financial industries operational in the event of a catastrophe that could make rapid long-distance transportation impossible, like the September 11, 2001 attacks
September 11, 2001 attacks
The September 11 attacks The September 11 attacks The September 11 attacks (also referred to as September 11, September 11th or 9/119/11 is pronounced "nine eleven". The slash is not part of the pronunciation...
, 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
Wells Fargo
Wells Fargo & Company is an American multinational diversified financial services company with operations around the world. Wells Fargo is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization. Wells Fargo is the second largest bank in deposits, home...
) into an account at a different bank (for example, Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
), the banks would have to physically exchange the paper check before the money would be credited to the 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.
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, and some advocates, contend that remote deposit — and by extension, the entire Check 21 Act — is an attempt by the banking industry to eliminate "float
Float (money supply)
In economics, float is duplicate money present in the banking system during the time between a deposit being made in the recipient's account and the money being deducted from the sender's account. It makes up the smallest part of the money supply....
," 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 possible for a bank to take the money out of a checking account on the same day a check is used in payment. This would make checks behave much like debit card
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
s, making it impossible, for example, to write a check to pay a 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.
Use
Remote deposit use is growing rapidly. A June 2009 survey by group Independent Community Bankers of America found that 62 percent of banks in the United States currently offered merchant remote deposit, and 78 percent have plans to adopt the technology by 2011.Client adoption of remote deposit capture is projected to reach 1 million in the next two years, and grow to over 5 million by 2012.
Some financial institutions accept remote deposits via conventional scanner
Scanner
Scanner may refer to:* WikiScanner, a tool that provides a searchable database of anonymous Wikipedia edits* A personality type described by self-help author Barbara Sher-Technology:* Scanner , for searching for and receiving radio broadcasts...
or smartphone
Smartphone
A smartphone is a high-end mobile phone built on a mobile computing platform, with more advanced computing ability and connectivity than a contemporary feature phone. The first smartphones were devices that mainly combined the functions of a personal digital assistant and a mobile phone or camera...
(versus an MICR scanner). Supported smartphones use operating systems Android by Google, and iOS by Apple (iPhones).
The banking industry does not keep an official tally of how many businesses use remote deposit nationwide, but, the number is estimated to be in the tens of thousands. Several independent companies such as ProfitStars, BankServ
BankServ
BankServ, a financial services company headquartered in Enterprise, Nevada, develops electronic banking software and operates outsourced data processing centers used by banks and other businesses to move money electronically...
, Diebold
Diebold
Diebold, Inc. is a United States-based security systems corporation that is engaged primarily in the sale, manufacture, installation and service of self-service transaction systems , electronic and physical security products , and software and integrated systems for global financial and...
, RDM Corporation, Landmark Clearing and NetDeposit claim to have signed up a few thousand customers, although several major banks have also developed their own systems and may eventually end up handling most remote deposit traffic.
External links
- Full text of the Check-21 Act
- FDIC's list of frequently asked questions about Check-21 Act
- RemoteDepositCapture.com: The Independent Authority on Remote Deposit Capture
- Remote Deposit Capture and Check 21 Programs
- Video of Remote Check Deposit in use at a small business (via YouTube)
- The Importance of Image Quality
- Extend the reach and success of remote deposit
- Cleaning Check Scanners to Ensure Image Compliance