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GoBank's Long Deposit Hold Tests Limit of Customer Patience

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Green Dot (GDOT) is taking a cautious approach to accepting remotely deposited personal checks—so cautious that it runs the risk of alienating customers and putting at risk tens of millions of dollars in investments at GoBank, its recently launched branchless operation.

A Green Dot executive defended the policy of holding personal checks deposited via smartphones for up to 10 days as a necessary anti-fraud measure. The company added that it believes the policy represents only a minor inconvenience to most customers.

John Morton, Green Dot’s chief risk officer, said that payroll, government benefit and other types of business checks dominate GoBank’s deposits and receive near-instant credit. He characterized GoBank’s long hold on the small number of personal checks it’s receiving as “smart risk control” and a function of the service’s youth. 

“Our experience is that personal checks deposited to a new customer's account via remote capture deposit are highly prone to fraud and abuse and so we have intentionally chosen to have a more conservative clearance policy on these types of checks,” Morton said in an email. “We further expect our clearance policy to evolve over time as we get more customer data from which to draw better conclusions on this topic," he says.

That’s a direction Celent senior analyst Bob Meara believes GoBank should move in quickly.

“Perhaps the worst funds availability I’ve seen,” he said of GoBank’s mobile remote deposit capture policy for personal checks. “A nonstarter, in my humble opinion.”

GoBank appears to be holding onto deposited funds for long enough to eliminate virtually any fraud risk, Meara added.

For customers who do rely on personal checks—such as college students receiving funds from family members—that policy could undermine the entire allure of branchless banking: speed and convenience.

What GoBank is counting on to attract customers is a high-tech, low-cost model that allows customers to select their own monthly fees. GoBank executives hope to turn a profit mostly from interchange fees, which merchants pay an issuing bank to process a transaction.  

For customers who object to GoBank’s 10-day hold, there is an alternative: deposit funds via debit card at a Walmart store and gain access to them immediately.

Bradley Leimer, head of digital strategy at Mechanics Bank, said he believes that despite its fund hold time of up to 10 days, GoBank’s RDC policies are generally in line with those of leading rivals like JPMorgan Chase, USAA and Bank of America.

“Most checks run through RDC aren’t available immediately,” he said.

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Comments (7)
Odd you haven't run the same story about Bluebird which has hundreds of complaints about RDC online. Bluebird has hundreds and hundreds of horror stories online. Amex got your tongue? Have Meara call Bluebird customer service.

Where is Meara getting his info from? They only opened the accounts to the general public a week or so ago.

Other prepaid cards are using 'Chexar', now 'Ingo Money', and charging 4% for non Government checks (payroll). So immediate funds on a payroll check of $1,000 costs $40.

A much bigger question is how Check21 makes funds available to Banks within hours while Banks keep consumers on the old ACH availability schedule.

Why is that AB?
Posted by Jim Donahue | Wednesday, July 03 2013 at 6:46PM ET
Mr. Morton's defense of GoBank's 10-day hold on checks requires a reader to believe that either the bank has the absolute, most inefficient check processing system in the banking industry, or that Check 21 never happened and image-based check clearing and settlement thru the Fed within 48-hours was not a reality. Far easier to believe that GoBank is simply endeavoring to profit at customers' expense.
Posted by jim_wells | Monday, July 08 2013 at 2:17PM ET
It's interesting that the misleading headline of this article refers to nothing. There is not a single reference in the story to any customer whose patience has been tested by GoBank's RDC holds. In fact, by the end of the story we find out that it's not much different from other providers. What we have here is a lazy opinion piece that I'd call "made-up journalism."
Posted by Chuck Phipps AAP, CTP | Tuesday, July 09 2013 at 5:04PM ET
Hi, Chuck, I'd like to address your concerns.
First, the bank just launched, so there are complaints online but there are few customers that have had the account for more than two weeks.
Second, 10 business days is the worst funds availability I've ever heard of for personal checks.
PayPal and American Express' Bluebird come in second -- each taking six business days to process a personal check over mobile remote deposit capture.
I'd be happy to talk about this more with you; My direct line is 212.803.8744.

Sean Sposito, Tech Reporter, American Banker
Posted by Sean Sposito | Wednesday, July 10 2013 at 4:49PM ET
Sean, the funds availability for GoBank is 2-3 days with the exception of personal checks. If there is so little info online what did you actually use for background on this 'article'? Nothing apparently.

I've had an account with GoBank since April.

If you really think Bluebird sticks to their 6 business day timetable which is 7 including the 'processing day' for checks you just aren't reading what is out their online. That schedule is for ALL their RDC.

Bluebird actually runs a background check and credit check on customers EACH time they get an RDC request - that is written right into their T&C. Now trying calling Bluebird's English as a second language customer service to deal with any issue and see how far you get.

How many ACTUAL Gobank customers did you get feedback from before writing this?
Posted by Jim Donahue | Thursday, July 11 2013 at 12:49AM ET
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