Remote Deposit Capture
What is “remote deposit capture”?
Remote deposit capture (RDC) is a service that allows the customer to scan checks and transmit the scanned images and/or ACH data to a bank for posting and clearing. Remote capture has moved the check processing function from centralized bank operations directly to the business customer. With RDC, the business initiates electronic deposits via image technology, but maintains responsibility for balancing the deposit dollar amount to the checks before transmitting the deposit to the bank electronically. The business customer receives an electronic acknowledgment of the deposit and the checks are truncated for destruction. RDC allows the customer to make a deposit without going to the bank and provides same day credit for checks deposited late in the day. Both the business customer and the bank can benefit from remote deposit capture services.
Customer Benefits
- Minimal investment in technology
- More return on investment
- Improved end-of-month/quarter processing
- Greater employee productivity
- Fewer depository accounts and reduced fees
- Faster access to information and improved decision making capabilities
- Bank service for customers located outside areas
- where the bank is located
- Improved availability and enhanced cash flow
Bank Benefits
- Improved customer relations and customer retention
- Reduced courier fees and transportation costs, and improved convenience
- Limited handling of items presented for deposit
- Expanded geographic market for business customers
- Accelerated clearings
- Consolidation of banking relationships
System Control Points
Capture (Image): Adequate controls must be in place at the point where image capturing occurs (normally at the customer’s financial office). Poor controls over capturing can result in poor quality images, high rejection and exception rates, improper indexing, and capturing incomplete or forged documents. Procedures should prevent destruction of original documents before verifying image quality, especially when the imaged information is used to process transactions. Detailed image quality standards have not been set by the industry and are not addressed in the legislation. Unless covered in a separate legal agreement between clearing parties, the party in the clearing process can return an item due to inadequate image quality.
Capture (Check): Customers should be advised to not destroy checks immediately because the scanned checks might not be legible. The bank should retain the originals until they are certain they have no risk relating to the item. The business customer prefers not to keep the checks too long, since it will increase the possibility of a check mistakenly being presented for payment twice. Some business customers have set a standard of 10-14 days as a good balance. Others base their retention period on the completion of the monthly bank reconciliation which means they would hold the checks for 30 days to ensure all deposits are captured and are accurately reflected on their bank statement.
Duplicate item detection: Any party which converts an original paper item into an image or IRD must warrant against presenting the item more than once.
Security: The institution’s security risk assessment should include imaging systems. Adequate security controls should be in place (secure data lines, customer privacy, etc.) to protect the imaging system and confidential customer information. Security should provide for adequate separation of duties, input/output controls, and prevent unauthorized changes of imaged data or insertion of fraudulent images.
Training: Adequate employee and customer training are important for proper system use. A lack of knowledge about imaging procedures could lead to quality control issues and misplaced or unavailable data.
Audit: Imaging needs to be scrutinized to ensure adequate controls have been enabled.
Backup and recovery: Backup and recovery planning should ensure restoration and retrieval of information within recovery time objectives per the business continuity plan. The loss of imaged files can significantly affect business operations if backup electronic or paper files are not readily available.
Legal Issues: Banks should be aware of the legal issues and risks that must be considered when offering this service to their business customers, including evaluating the legal implications of converting the original documents to an image. The institution may be required to demonstrate through audit trails, access records, and electronic storage practices that the images presented are unaltered. Management should consult with attorneys to discuss such matters as record retention and destruction of original documents.
Banks need legal agreements in order to use or provide a remote deposit capture service. The industry trend for legal agreements required by RDC solution providers is to “push” as much of the risk and liability as possible onto the end user of the RDC solution. A bank providing an RDC solution to a business customer would require the business to be responsible for all of the risks and liabilities. Additionally, the agreement should include terms pertaining to: hardware and software, items eligible for deposit, image quality, deposit and file limits, deadlines and recourse for missed deadlines, receipt and rejection or acceptance of a file, availability and settlement, lost files and transmissions, intrusion and stolen data, maintenance, retention and destruction of original items and a contingency plan.
Summary
The ability to deposit checks electronically has created a new era of electronic deposit preparation and settlement. As always, banks should be aware of applicable regulatory guidelines and develop processes to ensure adequate controls are in place to mitigate potential risks.
