There's no doubt that passage of the Check 21 Act opened the way for financial institutions to capitalize on exciting developments on the check-imaging frontier: remote deposit capture, or RDC, in all its many forms. By the end of 2005, a little more than a year after Check 21 was enacted, fewer than 4% of U.S. banks were making use of branch-capture technology. Yet by March 2007, more than a third of all financial institutions–some 3,000 of them–were using RDC. And a study by research and consulting firm Celent shows that number climbing to half of the nation's FIs by year-end. Indeed, adoption of RDC is occurring even faster than what Celent terms the “Internet banking gold rush.”

In just two years, branch capture has begun providing many institutions with faster funds availability, significant transportation cost reductions, and improved back-office efficiencies. For many financial institutions, ATMs and kiosks have become an extension of their branch networks. With image scanning technology, they are poised to become a logical extension of their branch capture strategies, as well. But is it the end of the trail?

Merchant Capture–Opening A Second Trade Route

While some say branch capture fulfills the major promise of Check 21, still others are staking their claim on merchant capture, which essentially allows businesses to take advantage of RDC. Just like branch capture, merchants simply scan the checks they receive, verify their totals, and electronically transmit them to their financial institution for collection. This will result in better cash flows, faster notification of returns and fewer trips to the branch.

There's only one problem: So far, merchant-capture programs come with a significant price tag, and adoption is unimpressive, with fewer than 2% of businesses signing up. The big banks are starting to promote merchant capture heavily because the bulk of their business accounts are major corporations or medium- to large-sized companies. These companies generally receive high volumes of checks, and handling them at the teller line or in the back office takes up considerable amounts of bank employees' time. But for all the hype surrounding merchant capture, it's seen very little action to date–especially in the small-business sector, a market credit unions are most eager to serve. But at typical costs of $50/month or more for service, plus transaction fees and equipment costs, who can blame small businesses for passing on this expensive offer? For small businesses, which typically accept less than a few hundred checks a month, the fees most FIs impose for merchant capture simply make it too costly.

Small Businesses and Consumers–Blazing a Trail to Convenience

In a just-out report (July 27, 2007), Forrester Research, Inc. suggests that the final frontier may be remote deposit capture from the home or office. And more than any other single factor, the appeal will be convenience. Last December, USAA Bank began offering such a product; and at EasCorp, we began piloting our own consumer deposit capture program in August. Forrester believes consumer adoption may take awhile to build, but acknowledges that the clear benefits are twofold: lessening the need to visit a branch and being able to make deposits any time of day.

We believe that credit unions should first take on the challenge of providing no-cost remote capture for their individual members, whether at home or at the office, to get the biggest bang for the buck. From there it's a simple matter of scaling up the scanning device to fit the deposit volumes of your small-business members to make it affordable for them, too. The technology is available now and, by obtaining it, the problem of making an impact with merchants is solved. What's more, credit unions would accomplish a market first: The opportunity to trade cost vs. convenience for cost and convenience for this growing segment of their businesses.

-Branch capture — Credit unions that aren't yet taking advantage of a branch capture service should do it now. With branch capture, you'll not only save a great deal in courier costs, but you will also improve cash flows and earnings. You also will gain important experience for deploying additional remote capture technologies later on.

-ATM and self-service kiosks — Look outside the walls of your branches. You may find an opportunity to add remote capture through specially-enabled ATMs or kiosks. Although the cost of this technology remains high, like everything else on the technology trail, it eventually will become commoditized, and costs will come down. In weighing the decision to buy immediately or wait, you'll need to ask, “How much more do I have to pay for this technology now?” “How much do we spend to process deposits each day?” “Can we reduce the collection expense by greater than the cost of the new technology?”

-Households and businesses — You already know that you can never have enough branches to satisfy your members, both consumers and businesses. Most small businesses bank with an institution that is nearby, and consumer members often stop using their credit union when they change jobs or move to another town. The final frontier of remote capture removes geography and branch locations as a limiting factor in maintaining membership with your credit union.

Completing the Transit

Most credit union officials agree that offering electronic access is the key to future success. Until now, deposits have been missing from the Internet-based, self-service banking menu of products. Well, the missing piece has been found. The final frontier is clearly in sight.