Remote deposit services are more likely to appeal to a few niche retail markets rather than mainstream consumers, according to several payment experts, who warn that providers will need to address several important operational and technical issues.
At least three vendors are developing or offering remote capture applications for retail banking, and one recent study said as many as 40% of banks may be interested in offering such services.
However, industry watchers say that consumers and small businesses have very different needs from corporate customers, and that bankers will have to consider a variety of potential complications, including the increased risk of fraud and poor image quality.
"The potential for fraud is much greater than with businesses," said Paul A. Carrubba, a partner in the Jackson, Miss., office of Adams & Reese LLP, who specializes in payment law.
One of the big draws of remote capture is that users do not have to go to a bank branch or automated teller machine to make deposits, but Mr. Carrubba said that allowing everyday retail customers to turn checks into electronic images that can be transmitted to a bank would remove a step in the payment chain and make it easier for criminals to pass bogus checks.
Though businesses could do so just as easily, they are less likely to try, he said, because they tend to have deeper relationships with their banks, and the banks often have more knowledge about their corporate customers than their retail ones.
"Consumers are much more mobile than businesses," Mr. Carrubba said. "A business has a store. You know where it is."
There are also some questions over what banking regulations would apply to the transactions. The Federal Reserve Board's Regulation E, which governs electronic transactions, gives people 60 days to dispute one, and Mr. Carrubba said that the rule generally has been interpreted to cover deposits made at ATMs or other electronic devices. However, in early conversations with the Fed, he has been told "that Reg E would not apply" to remote deposit capture, "but they won't give me anything in writing."
John Leekley, the founder and chief executive of the Atlanta consulting firm RemoteDepositCapture LLC, said that retail customers are generally less sophisticated than corporate ones and are likely to require more hand-holding, especially regarding the technical requirements for scanning checks.
Though people have access to a wide variety of scanning systems, some users may not understand how to configure them to produce images that are good enough for banks to process, Mr. Leekley said, and the burden of ensuring that the images are adequate likely would fall on banks.
In fact, he warned that educating retail customers about using the technology, especially the potential for misuse, could be a major task. "Known risks need to be explained to the end user. If there are known risks, the bank needs a way to deal with them."
Not everyone is convinced that remote capture would be a good fit for retail customers.
David Luther, the vice president of solution management in Unisys Corp.'s global financial services unit, said his bank clients are not asking for a retail version of remote capture. "It's not an immediate concern. They are busy enough with the higher threshold of checks" from businesses.
However, many executives agree there is a growing interest in offering remote deposit to retail customers.
Bob Meara, a senior analyst at Celent LLC, a research and consulting unit of Marsh & McLennan Cos. Inc., said 20% of banks in a December survey said they plan to pursue remote capture for retail customers, and 20% more were weighing the possibility.
"If a third of big banks do this, others may follow," he said. "I think it will be a very useful addition to banks' online banking products."
USAA Federal Savings Bank in San Antonio introduced a consumer remote capture service in 2006 for its military customers, many of whom are deployed far from a USAA branch.
Few banks have followed USAA's lead, but at least three vendors are pushing the idea. Fiserv Inc. started offering such an application this month, and Mitek Systems Inc. of San Diego started offering one last month that lets people capture check images with cameras in their mobile phones.
Software Earnings Inc., a Memphis provider of software that 37 of the top 50 banks use to process checks, is developing a retail system based on the same technology in its back-office imaging systems.
Trent Fleming, Software Earnings' senior vice president of strategic market development, said that it is testing the new system now with a couple of brokerage companies and is in talks with a handful of banks about the technology. He said he anticipates having an application ready to demonstrate in four to six weeks.
Remote capture will appeal to only a few types of retail users, Mr. Fleming said, and Software Earnings is focusing on three target markets: high-net-worth consumers, tradesmen, and multi-level marketing distributors, who typically sell products through the home-party business model.
"We do not believe this has general applicability," he said. "We don't believe it belongs in the hands of every consumer who may occasionally get a check for a birthday or Christmas."
Tradesmen and distributors are actually small-business customers, but because of the size of their accounts are generally considered retail customers. The affluent may use remote capture to make large, infrequent, deposits to fund their brokerage accounts, and Mr. Fleming said they would be drawn by "the prestige or the convenience of being able to deposit from home."
Mr. Carrubba said there are other details banks will need to explain to customers, such as how long they will need to retain paper checks after making electronic deposits. For example, if a paying bank says an image is not clear and refuses to settle a check, the consumer will need the original.
However, different types of users might need different policies, he said, and banks may want to require small-business owners who handle a moderate number of checks, such as plumbers or Mary Kay Inc. salespeople, to hold on to check longer than large commercial capture operations.
Banks will need to have detailed user agreements covering several types of users, Mr. Carrubba said, and "you don't have to have the same agreement" with everyone.
Also, banks should ensure that users keep their business deposits separate from their personal ones, because different policies could apply, he said. A partner in a small dental office should not deposit personal checks under the practice's user agreement, since "the agreement is with the entity, not the individual."
But Mr. Carrubba said banks are likely to feel pressure to offer consumer capture. "I think competition will make banks give way, and they will have to offer it more broadly."
