Charlie Saeman, the president of State Bank of Cross Plains in Wisconsin, has wanted to offer remote-deposit services to his commercial customers for some time but has hesitated because of the associated risks and technology expense.
Specifically, he wondered how or if the $446 million-asset bank would be able to recoup its losses in those instances when a customer submits an image of a check and subsequently submits the check itself and gets paid twice.
Now the bank is finally taking a chance on remote deposit through a new service from the Independent Community Bankers of America.
ICBA Bancard, a for-profit subsidiary of the trade group, recently contracted with Goldleaf Technologies Inc. of Brentwood, Tenn., to offer remote-deposit services to its members at below-market rates. ICBA Bancard will work closely with Goldleaf to make sure the process runs smoothly — including quick resolutions in the event checks get paid twice.
State Bank was the first bank to sign up for the service. Mr. Saeman said the ICBA/Goldleaf arrangement has allowed the bank to get a head start on a service it had not planned to begin offering until next summer.
“ICBA has given us the backbone to be a pioneer in this … just like the big banks who’ve got a heck of a lot more in their technology budget than we do,” he said.
It was not a particularly hard sell — Mr. Saeman is ICBA Bancard’s chairman and was instrumental in getting the subsidiary to make a deal with a remote-deposit vendor. But Mr. Saeman said he is confident other members of the trade group will use its service so that they can compete with bigger banks already offering remote deposit.
Remote deposit allows commercial customers to make images of their checks at their place of business with specially made scanners and then electronically submit them to their banks for payment. This eliminates hand delivery of the checks as well as courier and other transportation fees.
Consultants say that as more banks add it, remote deposit should speed up payment, which is the ultimate promise of the Check Clearing for the 21st Century Act of 2004.
Big banks are adding remote-deposit services for their commercial customers faster than smaller banks are, according to Celent Communications LLC. The Boston consulting firm said that eight of the 10 largest banks are offering remote deposit in some form but that only 15 or 20 regional and larger community banks — and only a handful of banks with less than $1 billion of assets — are doing so.
Alenka Grealish, the manager of Celent’s banking group, said a good majority of community banks are holding off mainly for the same reasons State Bank did: costs for new technology, and possible risks.
But deals like the ICBA’s should expedite adoption of remote deposit by many community banks, Ms. Grealish said.
“Groups like ICBA should be able to scale it down so that it is cost-efficient for the smaller institution to offer it, assuring that any bank that wants to make the leap from paper to electronic check exchange is able to,” she said.
The banker trade group said its members should save about $3,000 in start-up costs, about 10% to 15% below what Goldleaf would charge nonmember banks. After that ICBA members would save about 10% on the cost to operate the service; the dollar amount would depend on the volume of checks deposited remotely each year.
Besides the cost savings, Ms. Grealish said, deals like this are good for small banks because trade groups carry more clout in resolving problems between banks and specially designated vendors.
ICBA Bancard is referring the trade group’s members to Goldleaf, which has a number of community banks on its customer list.
Kevin Bell, a senior vice president at ICBA Bancard, said Goldleaf’s Web-based technology will spare banks much of the expense of the back-office equipment they would need if they offered remote deposit on their own.
Goldleaf tutors banks’ employees and customers on using the Web site. And it offer scanners that can frank, or electronically stamp checks to reduce the chance for duplicate payments.
Mr. Saeman’s bank will still need to invest in the scanners for some of its commercial customers, and expects to negotiate with many of them to buy their own scanners. It will also have to spend money on producing image replacement documents, printouts of check images for banks that have not adopted remote-deposit technology. Scanners typically cost several hundred dollars, and each IRD costs about 3.5 cents to produce.
But it is a good trade-off to be the first community bank in the Madison area to offer the service, Mr. Saeman said.
“We want to give our customers greater convenience, and perhaps quicker settlements, so that we don’t lose them to U.S. Bank,” he said. “We also think this will help us attract new customers.”
John Leekley, a partner in the Parsippany, N.J., consulting firm Blue Mountain Enterprises LLC, , says that all but the smallest of banks will eventually be forced by customer demand and competitive pressure to offer remote deposit.
Mr. Leekley tracks the imaging business for www.remotedepositcapture.com, which disseminates information for banks and their customers. He recounted a story a Washington State community banker recently told him about a 25-year customer who told the bank that if it did not start offering remote deposit he would switch to Bank of America, which had been courting him with its new services.
“I do believe the vast majority of corporations out there want remote deposit, and it will one day be as prevalent as online banking is today,” Mr. Leekley said.
