Remote deposit is the ability in the United States and Canada 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:
- 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 scanner nor take advantage of the Check 21 Act, it is also sometimes called remote deposit.
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, PNC Bank) 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. This reduction of the transportation time from total processing life cycle of a check provides a longer time for the corporation to process the checks. Often, this additional processing time allows the corporation to deposit more items at an earlier cutoff time than they otherwise would. In addition, most banks offering Remote Deposit Capture have extended the cutoff times for deposit-8:00 pm, while the deadline for regular paper deposits is 4:00 pm. 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.
On July 4, 2009, Element Federal Credit Union (formerly WV United FCU) became the first financial institution to deploy a smartphone app for its members. Members were already able to submit checks for deposit by using a scanner and secure web portal. This enhanced their check deposit offering by making it mobile friendly. USAA in 2009 became the first bank to permit customers to deposit checks with a smartphone. The customer uses the phone's camera to capture an image of the front and back of the check. The images, along with other verification information, are transmitted to the bank, where final validation occurs. The customer does not mail in the original check, instead voiding or discarding it. According to an industry study conducted in late 2013, only 10% of U.S. banks and credit unions offered mobile deposit, though many more planned to do so. Some of the largest U.S. banks do offer mobile deposit, including Bank of America, Chase, Citibank and Wells Fargo and some in Canada, RBC, TD, CIBC,Tangerine offer mobile deposit to Retail Banking customers.
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," 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 cards, 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.
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.
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 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.
- FIS Introduces Consumer Remote Deposit Solution, Bank Systems & Technology, July 24, 2008. Accessed on July 27, 2008.
- BankFox - Deposit Checks Online With Your Scanner
- Jim Bruene (21 January 2004). "Online Financial Innovations: Internet Strategies for Financial Institutions. The Forecast". Online Financial Innovations. Retrieved 19 April 2011.
- [WV United Federal Credit Union is First with iPhone-based Remote Check Scan & Deposit Finovate Blog, Jim Bruene Posted on July 12, 2009
- Stellin, Susan (2009-08-10). "Bank Will Allow Customers to Deposit Checks by iPhone". The New York Times. pp. B4. Retrieved 14 December 2013.
- Camhi, Jonathan (2014-01-06). "Celent: Banks Looking to Replace RDC Solutions". Bank Systems & Technology. Retrieved 8 January 2014.
- "Mobile Check Deposit from Bank of America". Bank of America. Retrieved 1 February 2014.
- "Chase QuickDeposit". Chase. Retrieved 1 February 2014.
- "Mobile Check Deposit". Citibank. Retrieved 1 February 2014.
- "Mobile Check Deposit". Wells Fargo. Retrieved 1 February 2014.
- "Mobile Cheque Deposit – RBC Royal Bank". www.rbcroyalbank.com. Retrieved 2015-12-02.
- "TD Mobile Deposit - Electronic Banking | TD Canada Trust". www.tdcanadatrust.com. Retrieved 2015-12-02.
- "CIBC eDeposit – Deposit cheques with your mobile device". www.cibc.com. Retrieved 2015-12-02.
- "What is Cheque-In™". Mobile Tangerine.
- Celent's estimates were published on 4 June 2007.
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- A Little Homework Could Have Saved Banks a Lot of Patents Grief
- Remote Deposit Capture Comes with Some Risks - A Short Description of Remote Deposit Capture
- Banks Will Face Competition in the RDC Space
- Wachovia Corporate Article on the Importance of RDC
- RDC Overview Overview of Remote Deposit Capture
- 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
- 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 Accurate Scans