WESTBURY, N.Y. -- Mike Egan is so excited about remote-deposit capture that while falling into a deep, anesthetic sleep prior to a recent surgery, he mumbled the words over and over.
"After the surgery, my doctor was like, 'Hey what is this remote-deposit capture you were talking about,'" recalled Egan, executive vice president/chief operating officer at $1.1 billion Nassau Educators Federal Credit Union.
Within the past few weeks, the financial institution has signed on its first business member to use the service--a large day care center with 40 employees. Through an alliance with CU Business Capital, a business services CUSO, the credit union has rounded out its extensive business services program with remote-deposit capture to woo those members that just don't have the time to come into the branches, Egan said. The process allows businesses to process checks outside of the branch with funds being available almost immediately.
"We felt that in order to be successful, we had to have all the services the business man was looking for," Egan said. "That includes remote-deposit capture. We didn't want them to run to banks for business deposits, but at the same time we didn't want to burden our lobbies with people making a huge number of deposits."
Remote-deposit capture is now offered by nearly three-quarters of the 30 largest U.S. banks with more than 37% of community banks doing the same, according to a report from Aite Group LLC. Of the 303 businesses surveyed, only 19% use services provided by one of the top five banks--Bank of America, Wells Fargo, Citibank, Wachovia and JP Morgan Chase. Still relatively new to credit unions, a number of CUSOs have started offering remote-deposit capture.
Founded in 1938 to serve school employees, Nassau Educators has since evolved to serve employees of Nassau County schools, colleges and universities, public libraries and other affiliated groups. The latter includes medical offices, attorneys, dentists, architects and certified public accountants. It's these professionals that the credit union has heavily courted over the past year, Egan said. Nassau Educators wanted a complete package of services that includes not only loans but cash management, merchant services, credit cards and business checking accounts. After looking at several CUSOs, CUBC was the best fit, Egan said.
From the signing of the contract to getting the RDC equipment installed, Egan said it took about 60 days. Prior to its relationship with the credit union, the newly signed child care center worked with a commercial bank to process it checks. Egan said there was a five- to seven-day hold. With RDC, the deposits are made in one day and funds are available by the next morning. It takes roughly seven days to get the business member linked up with RDC. Another business has just signed on with RDC through the credit union. Both businesses will be used as pilots before a full rollout is launched later this year.
Income Important as Privacy
As for how the credit union earns fee income, users pay a monthly fee and Nassau Educators earns on each transaction. Murray Halperin, senior vice president of marketing and business services at CUBC, said the CUSO earns income by charging a basis point on RDC deposit dollars on an annual basis.
Nassau Educators' business services program is still relatively new with 239 business checking accounts and $17 million in business loans in the portfolio, Egan said. Two business development officers are on staff to handle cash management relationships and go out into the community to build alliances with area businesses, respectively. The credit union recently opened up interest on lawyer's trust accounts, or IOLTAs, in New York. Attorneys use the accounts to pay for court filings, depositions, business transactions and for those who can't afford to pay for legal services. Egan said this new offering has expanded its reach even more to attorneys.
So far, the credit union is keeping pace with local competitors. There are only three banks on Long Island that currently offer the deposit transaction technology, Egan said. Halperin said credit unions have been slow to embrace RDC but it's likely due to a lack of education on how the arrangement works. The due diligence involved in the transactions and privacy issues are also important components of the education process.
"There are certain guidelines that businesses must follow in terms of privacy because they hold the checks," Halperin said. "Where are they putting the checks? Are they throwing them in the garbage can or shredding them? These are some of the issues that are vital to make sure that the privacy of the check holder is protected."
Halperin said ultimately the credit union has the final check accountability so CUBC has set up procedural guidelines that properly monitor transactions. NCUA, he pointed out, will surely come out with a set of rules as RDC gains momentum in the industry. Other developments such as the Federal Reserve closing some of its check processing facilities and a shift of fees, which currently come back through the Automated Clearing House, transitioning to ATM networks, stand to affect RDC's growth, Halperin said.
Meanwhile, Egan said credit union staff are pumped about the cross-selling opportunities that RDC stands to bring. A dentist, for instance, looking for financing to upgrade equipments may be interested in other services.
"We can talk to them about credit cards, merchant services and loans," Egan said. "With [RDC] being so new in the industry, we have a leading edge over the banks out there that haven't started offering this yet."