Many banks and credit unions around the country could soon be paying a price for the success of remote deposit capture.

RDC has become a ubiquitous, and popular, feature in most mobile banking apps, and its inventor — USAA — wants to start charging financial institutions a licensing fee to use it.

USAA says it created the technology to make it easy for its active-duty military customer base located all around the world to deposit checks no matter where they were. The $77.7 billion-asset company developed the technology internally in 2005, before launching it to customers in 2006.

Remote deposit capture chart

“We initially developed this for our customers who didn’t have the opportunity to go to a branch,” Neff Hudson, vice president of corporate development at the San Antonio-based financial institution, said in an interview.

“So we’re looking at a license program so we can bring some of the value [the technology has created] back to our membership base. The returns we’d get would be used to fuel future innovation on behalf of our members.”

When asked why the bank is seeking a licensing fee a decade into the iPhone era, Hudson said it was largely because RDC has become so pervasive in the banking industry.

“Now every bank and credit union is using this,” he said. “This is groundbreaking technology that is now widely used in the industry, and we are seeking fair value.”

The move comes at a time when many tech-savvy banks are becoming more vigorous in protecting intellectual property. As some banks become technology companies in their own right, and technology has seeped into every aspect of banking, IP has become more valuable than ever.

Hudson said USAA has sent out letters to “a couple hundred banks” so far, mostly in the medium-to-large asset size range, as well as engaging in phone calls and some in-person meetings. He declined to comment on any response received from other banks yet, adding that “it’s still early in the process and I really can’t speak too much to that, but conversations have been productive.”

This type of licensing request has parallels in other industries, said Brian Pandya, an intellectual property attorney with Wiley Rein. For example, telecom companies that manufacture mobile phones with Bluetooth technology all have to pay a license to the inventor of that technology; this is known as a standard-essential patent.

On the other hand, Pandya noted that “an argument any potential defendant could make is that what they are doing is slightly different than what USAA is doing.”

Of course, the big question is whether banks will be receptive to the idea of paying for a technology many have been using for several years.

Banks will likely weigh the amount of the fee against any potential legal costs they might incur in pushing back, said Brian Knight, senior research fellow with the Mercatus Center at George Mason University.

“It depends on how reasonable the [license] demand is,” he said. “A bank may be willing to pay a small license fee in lieu of expensive and time-consuming litigation. On the other hand, given how long this technology has been in use in the banking industry, there may be some skepticism from banks to now have to pay a license.”

Hudson also said USAA is not looking to be contentious in this issue.

“One of our goals here is to do this with minimal disruption to the industry,” he said. “We’re not trying to stop anyone from using" RDC.

Hudson declined to specify how much USAA hopes to charge each bank. It will "look at it on a case-by-case basis,” he said.

USAA has previously been involved in a legal battle with the tech vendor Mitek over patents related to mobile RDC technology that ended in 2014 with neither side paying the other. Hudson declined to comment on that case, or its potential relation to the current move seeking license fees, but he did say that USAA is seeking licensing for any use of RDC, whether it is used with mobile devices, desktop scanners or a voice technology it developed last year.

When Hudson was asked why USAA is going directly to banks, rather than the vendors that provide banks and credit unions with RDC technology, he explained that “we can’t speak for any vendors in the space. Any agreement [banks] have is between them and their vendors, but they are using proprietary technology.”

Hudson declined to say what path USAA might take if any banks refused to voluntarily pay the fee, but he said the bank would like to avoid litigation.

“We prefer to settle this through a licensing fee,” he said.

Knight said other banks’ responses could also depend on how strongly worded any communications from USAA are. (USAA declined to provide a sample of one of the letters it has been sending out.)

“If it takes a more softer tone, other banks may be more willing to comply,” Knight said. “But I have to assume [USAA] has made an assessment internally that they have a legal right to this IP and they can prevail in court if it comes to that,” he said.

With no legal papers filed, and USAA’s claim they want to resolve this without using the courts, Pandya said that it’s hard to determine how strong their claim is, but that banks’ vendor partners could step in if litigation becomes a reality in the future.

“Most banks are buying this technology from a vendor,” as opposed to creating it themselves internally, he said. “You could see vendors step in on behalf of their bank customers if aspects of their technology are involved.”

This could be especially true if one vendor sells RDC technology to hundreds of — likely smaller — banks.

For its part, USAA will “take as long as we need” to resolve the issue without involving the court system, Hudson said.

“We are not working on any formal timeline,” he said.

Bryan Yurcan

Bryan Yurcan

Bryan Yurcan is a senior writer with American Banker, with a focus on financial technology.