Prepaid card users may have smaller incomes than mainstream bank customers, but they deposit larger checks and they demand their funds in real time, making mobile check capture a riskier proposition for this audience.
Later this year, Plastyc plans to add mobile check capture to its growing list of mobile services for its prepaid card users. And just this month, Mitek Systems announced a variant of its technology designed for prepaid card users.
These companies have different approaches to handling the risk. (Mitek says the companies are not working together. Plastyc would not name its vendors.)
For Mitek, the biggest issue in designing a system for prepaid card users is competing with check-cashing stores, which provide customers with cash in real time. To reduce the risk of providing instant funds, Mitek allows prepaid card issuers to request a scan of the customer's driver's license with every check.
"It really mimics the process that you have when you walk into a check casher," says James DeBello, Mitek's president and chief executive.
"A bank would have a different process" for checking-account customers, he says. "A bank would not provide instant funds."
For Plastyc, a major consideration is whether scammers are trying to use its prepaid card accounts to double-dip on check deposits.
"In our case, we'd probably be exposed to more fraud attempts than these bigger banks, and so we want to take more precautions," says Patrice Peyret, Plastyc's chief executive.
Banks that offer mobile check capture have protections in place to block duplicate deposits, and they typically limit the dollar amount that can be deposited this way.
The dollar limit is not an issue for bank customers, since their biggest checks — their paychecks — are often sent by direct deposit. This is not the case with the underbanked audience.
"We serve a lot of people who … do not have the luxury of receiving direct deposit," Peyret says. Their employers are often small merchants who do not have a direct deposit program, and thus pay their employees by check.
DeBello says the underbanked go to check-cashing stores with checks in the four- to five-digit range, whereas retail bank customers deposit less than $500 for the average check.
To deter customers from making a mobile deposit and then cashing the same check at a store moments later, Plastyc plans to require that its customers deposit checks only from home, Peyret says. Plastyc will compare data from the phone's GPS to the address it already has on file for that user.
Further, "we will reserve the right to call people on a smartphone while they are depositing a check," Peyret says. "We will do that randomly."
This is a practice borrowed from providers of prepaid phone minutes. Some banks also do this for large transfers on corporate accounts, Peyret notes.
For fraudsters, "the last thing you want is to be called" during a fraud attempt, he says.
Mobile devices provide some security to go along with the risk, Peyret says. Because it is harder to install a virus on an iPhone or similar smartphone, "in a sense, they are more secure than PCs," he says.
Mitek encourages its clients to also require that consumers add a line to their endorsement to indicate that the check is being deposited with a mobile device. This should indicate to a check-casher that the check was already used.
Mitek's strategy is more focused on adding security through the process of capturing images, DeBello says.
Banks can add extra layers of authentication that make use of a smartphone's other capabilities, he said.
"GPS is interesting ... [and] that's readily available on all smartphones," he said. "You can do things, if you got creative, with facial recognition as well. I'm not suggesting that we're doing that."
Banks may not want to use the same methods on their customers, since the benefits might not outweigh the customer-service issues that such processes raise, says Avivah Litan, a vice president at the Stamford, Conn., market research company Gartner Inc.
"Banks have been pretty reluctant to use GPS location information because they don't want their customers to think that they're intrusive," she says.
And if bank customers deposit smaller checks than the unbanked do, there wouldn't be enough money at risk to justify these measures in bankers' minds, Litan says.
However, banks and prepaid card companies should use "whatever you can about the endpoint," such as device identification details, she says. "You get a lot of great information and it's not intrusive for the customer."