Remote Deposit Capture

Today, Aug 2005 by Scott, Rex, Lorenzo, Les

The "weapon of mass truncation" in the war on rising payments costs and out-of-town competition

Advanced Financial Solutions (AFS) is a technology company recognized worldwide for its complete portfolio of innovative, cost saving, and productivity enhancing image-based digital solutions that meet real world payment processing needs. Organizations count on AFS for solutions that enable them to process checks, payments, transactions, and documents more efficiently and profitably. The AFS industry leading check processing, check imaging, check archival, electronic check conversion, remittance, document processing, truncation, and check image exchange solutions are shaping the future of the payment processing industry across all the markets they serve - banking, insurance, energy, transportation, credit, and government operations.

Payment processing is undergoing a major transformation brought on by the convergence of new breakthroughs in check imaging deployment and the landmark passage of the Check 21 Act. The red-hot demand for new remote deposit capture solutions is changing the shape of the payments industry for financial services providers across the country.

Changing the Geometry of Payment Processing

The old adage says that the shortest distance between two points is a straight line. In a bold step away from tradition, the early adopters of remote deposit capture changed the geometry of the payments industry. By truncating check payments at the point of presentment, along with the scanning and capturing of the MICR line information and front and rear check images direct electronic deposits are delivered to an image-enabled payments services provider for processing and collection.

Remote deposit capture allows the original checks to be retained by the commercial client at point-of-entry into the processing system, rather than having the checks delivered to the bank for clearing, eliminating rising courier costs. Commercial clients also realize many other efficiencies-from improved cash flow and deposit availability, to later deposit deadlines, consolidation of accounts, and reduced processing costs, fraud exposure, and reconciliation time.

Banks are reaping benefits from remote deposit capture as well. Remote deposit capture allows banks to reduce workloads and staffing by truncating the flow of costly paper check processing, and by expanding their market share and attracting new customers with a distributed capture solution based on "where payment capture occurs."

From Emerging Trend to Profitable, Common Sense Business Practice

Since the first of the year several banks have announced or already launched remote deposit capture programs. Most remote deposit capture systems incorporate desktop check scanners and secure Internet access to capture images of payments at a commercial client's business location in a "back-office" type environment. MICR data and check images are delivered to the bank for posting, and subsequent clearing through image-based cash letters to the Federal Reserve for clearance to paying banks, bank-to-bank image exchange, or substitute checks.

The more advanced solutions incorporate recognition and balancing tools that validate the MICR lines, read check amounts, and ensure deposits are balanced before transmitting the data to the bank.

How a Bank's Reach Can Extend Its Grasp

With geographic boundaries virtually eliminated, remote deposit capture has become a defensive move for many banks. Stiff out-of-town competition for long-term commercial clients is a new threat for which many banks were not prepared.

Remote deposit capture simplifies banking relationships - allowing commercial clients to break geographic dependencies and consolidate payments with a single, preferred institution. The elimination of multiple accounts simplifies reconciliation. With the benefits of "national reach", remote deposit capture provides commercial clients with all the financial advantages of "local processing" - accelerated funds availability and maximized cash flow.

If necessity is the mother of invention, then technology is the brother of reinvention. Remote deposit capture allows banks to "reinvent" themselves and to extend their grasp and not only keep valuable existing customers, but to compete for new out-oftown corporate accounts that were previously not geographically viable.

"Near-Market" Opportunities

Many banks have business relationships in a market contiguous to their current footprint but can't quite justify the brick and mortar investment to build a branch. Placing remote deposit capture at these client locations can solidify the bank in these markets until such time that the investment in a branch becomes justified.

Pathway to Productivity and Profitability

Remote deposit capture is the perfect technology to enhance a bank's payments franchise. It is a "Weapon of Mass Truncation" that no financial institution should be without.

Rex Scott ;'s general manager, AFS Consulting Services. He can be reached at 919-774-1515 or via e-mail at rscott@afsimage.com.