The Federal Financial Industry Examination Council's guidance on remote deposit capture, issued in January, has prompted significant comment, and many financial institutions have altered their policies and procedures in response to its recommendations.
This is as it should be since most of the document gives important, albeit vague, guidance to institutions on safely operating such a deposit capture system.
One statement in the report's summary suggests, "RDC is not suitable for all customers, and financial institutions should exercise caution [regarding] to whom they deploy RDC." This got me thinking about who would not be a candidate for RDC. Or rather, about which customers able to make a deposit at any of your branches you would refuse to allow to make the deposit electronically.
Obviously, the agencies that make up the examination council thought enough of this matter to include it in the guidance. But I struggle to come up with a convincing reason why any financial institution would refuse any customer the ability to do RDC. If a customer does not qualify for a credit card or a loan, he or she does not get one. However, if they open a deposit account, they have the right to deposit items in that account.
Banks can and do have the ability to restrict the customer's access, using holds and float tables, to funds from deposited items. But these curbs apply equally to RDC items.
Perhaps the council was thinking about the following issues:
Operational errors. Many RDC systems allow for items to be redeposited, and there are legitimate reasons for doing so. Any RDC system used by a financial institution should include adequate controls to prevent duplicate entries. However, if a customer routinely tries to scan items multiple times or misuses the options for resubmitting items, then it is likely that that customer could lose the privilege of using RDC. This is no different than the response to misuse of any other product or service: You break the rules, you lose the privilege of this service. But it is certainly not a reason to proactively deny RDC service.
Fraud. The assumption is that, somehow, there is a greater chance of someone committing fraud using RDC than in making a traditional deposit. Assuming that the RDC system used by the financial institution has even a modicum of security features to prevent duplicates and restrict deposit amounts, the issue then would be with someone creating a fictitious check and scanning it. I agree it would be difficult to view a scanned item and detect it as a fraud, but the fact is that no items deposited at any branch are reviewed as potentially fraudulent items! No one is looking at any deposited item, regardless of where they are deposited, so to whatever extent this is an issue, it is exactly the same whether a customer is depositing manually or via RDC.
Redirected credits. Suppose someone inside the company or, worse, inside the bank conspired to change the deposit account number to redirect the money from the company to an account controlled by the fraudsters? Again, this is possible, but it can be done by insiders without access to an RDC system. In fact, using an RDC system may cause customers to look at their deposit information more carefully than usual, making it more likely that a business owner would notice a missing deposit within 24 hours of its diversion.
New accounts. Many banks do routine checks on new customers to find out their credit history and identify potential problems such as excessive insufficient funds. Based on this information, a bank may deny an account to a potential customer. But once a bank has decided to open an account, there is no reason for that customer to be denied the RDC option. Some might say that you should not offer a "new" customer RDC, that you should wait some period and "see how they perform." Interesting. Replace "RDC" with "the ability to make a deposit" in that last sentence, and see if you can say it without realizing how silly it sounds.
The fact is that RDC is going to replace traditional deposits as the primary method of depositing for ALL customers.
It took dozens of years for services like automated teller machines and debit cards to become commodity items that all account holders expect to get from their financial institutions. RDC is a commodity service now. There is a significant difference in deployment strategies at those banks that understand this is the new payment paradigm and not a niche service. I suggest that, once a customer has a scanner on his or her desktop from bank A, it will take a good bit of effort for bank B to replace that scanner with its own service.
Most banks with an RDC system are "driving on the shoulder," with limited deployments of RDC to the best customers, businesses. It is time to stomp on the gas, get over in the passing lane and take advantage of the opportunity you have to deploy RDC to your customers before your competitor does.
Oh, and if you have a reason not to deploy RDC to a customer who can make a traditional deposit, please write a response. I think I'm right on this issue, but am open to the possibility that I may be wrong. Happy scanning!
