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.