CHECK 21 AND REMOTE DEPOSIT CAPTURE
In the past few years, Remote Deposit Capture (RDC) has begun to revolutionize the way people do banking. In October 2003 the Check Clearing For the 21st Century’ legislation, more commonly referred to as Check 21′, was passed creating a stir of excitement in the banking community the likes of which had not been seen since the advent of online banking in the 1990s. In October 2004, Check 21 was implemented allowing banks to process images of checks and most significantly, without having to physically process the original paper checks.
Up until the implementation of Check 21, banks could only process the original paper check which had to be transported to the paying bank and await clearance, delaying processing and funds clearance, a process that could take up to several weeks to complete. With the advent of the Check 21 Act, banks could legally process ACH (Automated Clearing House) files and truncated IRD (image replacement documents) making it possible for check deposits to be scanned, cleared and funds transferred electronically within a matter of hours and without being restricted to the normal bank trading hours.
Most US banks have rushed to jump on board with Check 21 compliant technologies. More recently this new technology has also begun to be adopted by corporations and merchants allowing them to scan checks in-house, or through a service provider, and electronically send the image to a central bank for deposit without having to forward the original paperwork, thereby eliminating the requirement to physically send paper checks to their bank. The RDC revolution in check clearing effectively increases cash flow and reduces overheads for corporations and retail merchants, making it particularly appealing for industries such as real estate, healthcare and insurance where low volume, high dollar value deposits are common.
As with any great advance in technology, as the infrastructure for RDC becomes more refined and developed, the cost of related technologies decreases and access to that technology gradually filters down to the individual, such that today we stand at the edge of a new frontier in personal banking, where with the right technology, the homeowner could deposit checks into their bank account without leaving home. Where online banking brought your bank account information to your home computer, with RDC your home computer can now take your check deposits to the bank.
HOW REMOTE DEPOSIT CAPTURE WORKS
Essentially all that is needed for home RDC is a computer, an internet connection, a check scanner, some supporting software and a service provider such as a bank.
Once you receive your check:
1. You would enter the details of the check into an online form for upload to your bank
2. You would then scan the check using a desktop scanner, instead of taking the check to the bank and standing in line.
3. The scanned check image is then transmitted via internet to your bank, as a 128-bit encrypted ACH (Automated Clearing House) or a truncated image deposit file for non-ACH eligible checks.
4. Upon receipt of the ACH /image deposit file the bank will clear the funds either electronically for ACH files or by re-printing the truncated image file as an IRD (Image Replacement Document) file.
5. Funds will be deposited into your DDA (Demand Deposit Account) bank account.
6. You can throw the paper check away.
WHY USE RDC?
Check 21 applies to all US bank checks drawn in US dollars. The benefits of the legislation are many to the banks, merchants and individual customers.
For banks there will be billions of dollars in savings because they no longer need to invest in the machinery to route paper checks, or the planes and trucks to transport checks between and within banking institutions or the staff to handle the paper checks. Banks will also benefit from the new product lines that will open up potentially boosting revenue further.
For the merchant, savings can be made by eliminating couriers, bank account consolidation and decreasing float times (the time between drawing the check and clearing it) significantly increasing cash flow. In time, point of sale RDC technology will permit merchants to accept and clear personal checks on the spot.
For the individual the ability to transmit electronic check encryptions to your bank 24/7 will save you time, give you back your lunch break and help you keep more accurate track of your bank balance, because float times will be minimized.
Just as customer acceptance of automated teller machines (ATM) took over a decade and online banking has yet to be fully embraced by all members of the community, so too will the wider acceptance for the convenience of RDC take time to infiltrate the world of personal and commercial banking. But for those who are house-bound or find it difficult to get to the bank personally, RDC provides a new alternative that is convenient, simple and technologically accessible to most people in the near future.