Remote Deposit: A Complete Guide

Remote deposit is a convenient way to deposit checks remotely using a mobile device or computer. This technology has revolutionized the way people manage their finances.

With remote deposit, you can deposit checks from anywhere, at any time, as long as you have a stable internet connection. This eliminates the need to physically visit a bank branch or ATM.

Remote deposit is often referred to as mobile deposit or digital deposit. It's a secure and efficient way to deposit funds into your account.

Remote deposit, also known as RDC, allows customers to deposit checks electronically using a specialized scanner.

The Check Clearing for the 21st Century Act, which took effect in 2004, paved the way for the development of RDC. This act created a new negotiable instrument called a substitute check, which is the legal equivalent of an original check.

A substitute check contains an image of the front and back of the original check that can be processed as the original check.

The customer transmits this image electronically, usually via the Internet, to the depository financial institution.

First Tennessee Bank was one of the first financial institutions to implement RDC, introducing the "First Deposit Plus" product in 2003.

As of March 2008, First Tennessee had customers in 46 states using its RDC service.

By 2008, two-thirds of all U.S. banks were offering RDC services, according to Celent, an international financial services consulting firm.

Some banks offer RDC for free on the condition that the customer maintains a certain minimum deposit balance.

Others charge a fee, perhaps $60 a month.

Specialized scanners record and transmit images of the front and back of the check being deposited, and can cost between $225 and $2,500.

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Implementing remote deposit requires a mobile banking app that allows users to deposit checks remotely. This app typically uses a smartphone's camera to capture an image of the front and back of the check, which is then transmitted to the bank's system for processing.

The bank's system must be able to verify the check's authenticity and ensure that the funds are available in the account. This verification process typically takes a few minutes, after which the funds are credited to the account.

To manage remote deposits, banks must have a system in place to track and verify deposits, as well as to handle any issues that may arise. This can include monitoring the deposit process, resolving any errors or discrepancies, and communicating with customers about the status of their deposits.

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By 2010, client adoption of remote deposit capture was projected to reach 1 million, and by 2012, it was expected to exceed 5 million. This rapid growth highlights the increasing demand for convenient banking services.

In 2013, a study found that only 10% of U.S. banks and credit unions offered mobile deposits, but many more planned to adopt the technology. This shows that even with plans in place, actual adoption can take time.

Research by Celent in 2013 revealed that 20 million customers used mobile check deposits that year, more than double the 10.9 million in 2012 and 2.2 million in 2011. This growth demonstrates the popularity of mobile banking services.

By 2015, Celent estimated that 87 million customers were using mobile check deposits, leading to a decline in foot traffic to bank branches. This shift in consumer behavior has contributed to the closure of bank branches.

The 2020 Coronavirus pandemic accelerated this trend, further increasing the use of mobile check deposits and reducing in-person check deposits. This has had a significant impact on the banking industry.

Regular reporting is key to monitoring the effectiveness of your Remote Deposit Capture (RDC) service. Financial institutions should produce internal reports on the status of their RDC service, covering various metrics such as duplicate deposits, violations of deposit thresholds, and velocity metrics.

These reports should also include transaction dollar volume, return item dollar volume, and the number of checks rejected due to poor image quality or other factors. It's essential to review these reports in a timely manner to identify any aberrations.

Management should promptly address any issues found in the reports, whether it's within the institution, with the customer, or with the RDC vendor. This ensures that the RDC service is running smoothly and efficiently.

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Change Control Processes are essential for any technology system, including Remote Deposit Capture (RDC). Written change control procedures should be in place to govern how software and hardware will be updated and how policies will be revised.

Financial institutions and their RDC vendor should have mutually agreed-upon procedures to ensure all customers are on the same page when software or hardware is updated or policies and procedures are revised. This helps avoid glitches from checks not being deposited or funds not being credited to the customer’s account.

Change control procedures can help prevent errors and ensure a smooth transition.

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Remote deposit comes with its fair share of risks, particularly from a compliance perspective. Financial institutions must consider the risk of money laundering or other suspicious activities when offering RDC services.

Institutions should refer to the FFIEC Bank Secrecy Act/Anti-Money Laundering Examination Manual to determine their responsibilities. This manual outlines the steps to take to mitigate the risk of violating laws and regulations.

Banks offering RDC services should ensure their own Bank Secrecy Act compliance experts or outside consultants consider how these laws and regulations may impact RDC. They should develop policies, procedures, and processes to mitigate this risk.

Bank staff responsible for RDC services should receive training to ensure compliance with bank policies and procedures as well as existing laws and regulations.

Screening your vendor is crucial to ensure they're reputable and competent. Most banks work with a vendor that provides, installs, maintains, and updates the hardware and software for RDC services.

Financial institutions should look for vendors with experience in providing RDC services and check their references. This will give you an idea of their track record and how well they've performed for other clients.

Either the institution or the vendor should ensure that the customer's employees are trained in the use of the RDC system. The FFIEC Outsourcing Technology Services Booklet contains information and recommendations on how to screen, evaluate, and monitor technology vendors, including those providing RDC services.

Financial institutions must determine whether and to what extent the use of RDC systems increases exposure to the risk of money laundering or other suspicious activities.

Institutions should refer to the FFIEC Bank Secrecy Act/Anti-Money Laundering Examination Manual for a description of their responsibilities.

The risk of violating laws and regulations in these areas increases when less personal interaction occurs between a bank and its customers, or a bank's ability to examine financial instruments is limited.

Banks offering RDC services should ensure their own Bank Secrecy Act compliance experts or outside consultants consider how these laws and regulations may impact RDC and develop policies, procedures, and processes to mitigate this risk.

Bank staff responsible for RDC services should receive appropriate training to ensure compliance with bank policies and procedures as well as existing laws and regulations.