Click Cover to Read Digital Edition



ICBA National Convention
March 1-5
Gaylord Palms Resort
ABA Mutual Community Bank Conference
March 22 & 23
Marriott Marquis
Washington, D.C.
Card Forum & Expo
April 8-10
More events >  

<- Back

Share |

Print Friendly and PDF

Use Image Cash Letter Deposits to Transition Paper Depositors to Electronic

By: Matthew Gniech

As many maintain, remote deposit capture was originally deployed as a customer retention product following Check 21 legislation being signed into law. In 2004–2005 banks offered RDC, but the infrastructure and image-clearing network necessary to clear checks electronically was, at best, in its infancy. What is not up for argument is that the bridge solution for this gap — printing nearly all items as image replacement documents to continue and complete the clearing process — was painful. The practice was overall wasteful in process, time and especially cost, but was competitively necessary as all of the larger banks began offering this deposit enhancement to retain, and if possible, grow market share.

Ironically, the situation has flipped as financial institutions now have the enhanced infrastructure and image-clearing networks necessary to clear all but a few specific item types electronically. Although remote deposit capture has been around for nearly eight years, many customers remain hesitant to convert, leaving untapped capacity and significant potential for growth.

To complicate matters further, FIs cannot continue to accommodate their large paper-based depositors as they have in the past. The paper-based clearing mechanisms the industry developed over decades continue to be dismantled. Much like the Federal Reserve Bank, scores of banks are closing their large centralized item-processing centers as they deploy more distributed-capture models. All of this creates a sort of disconnect between the commercial paper-based depositor and the FI that would prefer to maintain the relationship without having to push commercial deposits into their retail branch network.

So why hasn’t RDC been more widely adopted, given the infrastructure is now in place? Why do clients continue to bring paper deposits to the bank when electronic deposits are quicker and more cost effective?

One of the challenges to adoption is the limitations of check-scanning equipment in terms of sacrificing speed for quality or vice versa. The check scanners offered in the past have been slow and cumbersome — unable to handle large check volumes. While the software applications have evolved, the scanning technology has not stayed on pace. In many situations, checks simply are not available until later in the day, and even though RDC deposit deadlines are often extended past traditional paper deadlines, there still is not enough time to make same-day cutoffs.

However, a new complementary technology solution is available that can assist community banks in transitioning their paper depositors to electronic. This solution is a win for the customers who have yet to realize typical advantages of electronic deposit, such as extended deadlines, lower price points and potential transportation savings, without jeopardizing their process. The solution also helps the bank — allowing them to comfortably continue the migration from their legacy paper-based systems to more efficient processes.

Commercial Image Cash Letter Deposits

In an effort to address these gaps, more and more community banks are expanding their acceptance of commercial image cash letter deposits. It is a way for them to compete with larger banks by offering the same deposit options.  Unfortunately, until now the only way for their commercial clients to effectively produce ICL deposits was with larger, more expensive item-processing equipment or with slower low-volume check scanners paired with separate software packages not ideally suited for use by retailers, merchants or other commercial clients.

Improve Operational Efficiency and Customer Satisfaction

By embracing ICL deposits as a complement to RDC, FIs have another solution to increase customer retention while expanding deposit growth potential. RDC-resistant clients may be interested in this alternative, as it offers a more streamlined process and does not sacrifice quality for speed.

Furthermore, one particular solution has the ability to process both checks and currency, creating a useful solution for retailers and other businesses that accept both forms of payment. Community banks benefit in two ways: (1) a new, high-speed end-to-end electronic treasury solution for their clients and (2) the community bank is able to offer a service to customers that many larger banks do not, creating a competitive advantage.

To maintain and grow the base of commercial deposit clients, community banks need to offer an alternative to RDC that satisfies more of their clients’ needs. Recent technology breakthroughs make these services more affordable and practical and feature solutions that scan and image deposit items at 400 documents per minute, making the move to electronic deposit processing viable for even the most check-intensive businesses. This same solution creates and sends the ICL deposit to the bank, simplifying the effort for both parties. It can also process currency at 1,600 bills per minute, providing a true multi-purpose solution for retailers.

Community banks exploring ICL deposit technology options should look for a simple and intuitive ICL solution that is easy to install and can start generating a positive impact on all fronts. An experienced partner will assist in the implementation process by installing the hardware and software for proper testing without taxing internal resources. By offering this alternative, community banks now have a turn-key solution for clients that have been resistant to electronic processing. Commercial ICL deposits are the next wave of innovation that can help community banks operate and compete even more effectively in a market where clients may feel such services are offered only by larger banks.

Matthew Gniech is product manager - check image at Cummins Allison. For more information, visit