Remote deposit capture (RDC) is considered to be the most important development by the Federal Reserve in the US. Remote deposit capture refers to the ability to deposit a check into a bank account from a remote location without having to physically deliver it to the bank. This is achieved by scanning a digital image of the check and then transmitting it 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. Benefits of the service include convenience, better deposit availability, and reduced transportation cost and risk. The service was initially aimed at corporate and large customers.
The Federal Reserve estimated that around 20% of checks paid entered depositary banks as electronic images sent using remote capture devices. The Fed also noted that a vast majority of checks deposited as images (more than 99%) came from business customers.
A majority of the banks in the US currently offer RDC services in one form or the other. By the end of 2013, there were more than 1,300 banks offering RDC services while the number at the end of 2014 reached 2,900. It is estimated that by the end of this year, more than 5,000 of the 7,000 financial institutions in the US will have an RDC solution in place. Likewise, the number of users using remote deposit capture has skyrocketed from less than 1 million in 2010 to more than 40 million in 2014.
With the increasing adoption of RDC, financial institutions have started offering these services to individual customers through mobile phones, commonly known as “mobile remote deposit capture.” Instead of driving to the bank to deposit a check, customers can now use a mobile app and a camera to send a mobile deposit to the bank. According to an estimate, close to 20 banks of the top 25 retail banks in US offer a mobile check deposit facility. Many customers are moving to a mobile-only mindset, so banks have started offering services that allow customers to do everything from the click of a button. More and more banks are expected to follow and have a mobile RDC solution in place to entice individual customers’ deposit checks remotely while increasing customer convenience.
Though the growth of the RDC solution is robust, there are concerns about the system. The key issue which the solution providers need to address is that of fraud and security. In the past, online thieves have stolen the “shine” from remote deposit capture by presenting duplicate check images to multiple banks. According to an estimate, duplicate check fraud in the US is now estimated at $864 million a year. An incident where Russian thieves broke into an online check image database affected more than 1,200 US banks amounting to a loss of more than $9 million.
According to a report by CONIX, banks intercept between 40 to 100 duplicate items per million payments processed. However, the good news is that most of the processors do encrypt their databases of late. These newly designed systems check the images to ensure that there are no duplicate items within current or previous deposits. The bank can set time frames for how far back the system will look for such deposits.