The risks and rewards of remote deposit services
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The Risks and Rewards of Remote Deposit Services. 2009 Treasury Management Conference September 10, 2009 Omaha, Nebraska. Agenda. What are Remote Deposit Services? Remote Deposit Capture Branch Capture Background on Remote Deposit Benefits Risks Responsibilities Agreements.

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The Risks and Rewards of Remote Deposit Services

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The Risks and Rewards of Remote Deposit Services

2009 Treasury Management Conference

September 10, 2009

Omaha, Nebraska


  • What are Remote Deposit Services?

    • Remote Deposit Capture

    • Branch Capture

  • Background on Remote Deposit

    • Benefits

    • Risks

    • Responsibilities

    • Agreements

What is Branch Capture?

  • Branch Capture is a process that allows tellers/branch personnel to scan checks accepted over the counter and transmit the scanned images to the FIs central operations area.

What is Remote Deposit Capture?

  • Remote deposit capture is a service which allows a user to scan checks and transmit the scanned images and/or ACH data to a financial institution for posting

Remote Deposit Process

Remote Printing






Image Exchange


Image Exchange

Depository Bank


Paying Bank






Direct Send

How does RDC Work?

  • Merchant customers present traditional paper checks to purchase items or make payments.

  • The merchant captures these checks using a remote deposit scanner and application which collects data and images, and creates a specially formatted file.

  • The merchant submits the file electronically to the financial institution (or its service provider) for deposit, clearing, and settlement.

  • Once the bank validates the electronic file integrity, the deposit is posted and the transaction is cleared and settled using the Check 21 model.

Any Bank

FRB Account


Credits & Debits

Check Advices / Adjustments / Item Fees







Transit Items


Returns (Paper / Electronic)

Paying Institution

Any Bank




Transit & On-Us Items


Any Bank


Remote Capture Vendor


Financial Institution

Image Archive

DDA Posting


Deposit Activity

Online Banking

Clearing and Settlement

  • Image – based

    • Electronic cash letter transmitted from BOFD to collect items

      • “Truncation”

  • ACH

    • eCheck - “Conversion”

      • ARC/BOC/POP

eCheck vs. Image Exchange

  • Conversion refers to the electronification of specific check data (MICR, amount, etc.) into a non-image file format for clearing and settlement using ACH

    • Business checks, travelers checks, credit card convenience checks, checks >$25,000, and others are not eligible.

      • ARC – Accounts Receivable Conversion

      • POP – Point of Purchase

      • BOC – Back Office Conversion

eCheck vs. Image Exchange

  • Truncation refers to the conversion of traditional paper checks into electronic images for clearing and settlement using the Check 21 model

    • All checks including business checks, money orders, etc. are eligible for truncation and there is no statutory limit on the transaction amount

Rewards of RDC - FI

  • Reduced Transportation Costs

    • ATM/Branch/Incoming Customer Cash Letter

  • New Revenue Streams

    • New Clients

    • Existing customer consolidation of relationships

    • Additional products

    • ACH & Checks

    • Elimination of geographic boundaries

Rewards of RDC - FI

  • Reduced Processing and Clearing Costs

    • Lower fees for image exchange

    • Transportation costs reduced

    • Staffing reduction

Rewards of RDC - Customers

  • Accelerated Clearings

    • More Processing Time

    • Later Deposit Deadlines

  • Improved Availability

    • Make deposits earlier in the day

  • Enhanced Cash Flow

    • Accelerated clearings and earlier availability

Rewards of RDC - Customers

  • Reduced Transportation Costs

    • Up to 80% reduction

    • Convenience

      • No need for couriers or trips to FI

  • Reduced Processing Costs

    • Eliminate

      • Time and expense to go to bank

      • Time spent balancing deposit and associated keying

    • Consolidations of Banking Relationships

Rewards of RDC - Customers

  • Consolidations of Banking Relationships

    • Geographic footprint no longer necessary

    • Increase volume

      • Lower pricing – per item fees

      • ‘preferred’ availability

      • Expanded credit relationships

      • More efficient corporate treasury

RDC Issues - Customers

  • No legal foundation for Remote Deposit Capture

    • Agreements assign responsibility to corporate

  • Image Quality

    • Corporate user responsible for adequate images

  • Duplicate Items

    • Corporate user warrants that item will only be presented once

RDC Issues - Customers

  • Captured Checks

    • Retention and security

    • Destruction

  • Cash Deposits

    • Deposit at bank

    • Transmission Failure

  • Security

    • Access to scanner and transmission of deposits

RDC Issues - FI

  • RISK – FFIEC Guidance Issued

    • Pre-Implementation

    • Post Implementation

  • No legal foundation for RDC

    • Regulations/Law/Legal Precedent

    • Agreements

Risk – Pre-Implementation

  • Assessed by senior management

    • Legal risk

    • Compliance risk

    • Reputation risk

    • Operational risk

  • RDC program

    • compatible with FI business strategies

    • Management able to manage risks

RDC Agreements

  • Definitions

  • Hardware/Software Issues

  • Deposit & File Limits/Returns

    • Deposit and File Limits

  • Transmission Issues

  • Image Quality

  • Items Eligible for Deposit

  • Deposit Deadlines

  • Funds Availability Schedule

  • Retention/Destruction Policy

  • Warranties and Indemnification

  • Liability

    • Errors and Discrepancies

    • Intrusion and Stolen Data

  • Updated Customer Information

  • Contingency Plan

  • Financial Risk (Risk Assessment)

  • Controlling Law

Risk - Post Implementation

  • KYC Procedures and Policies

  • Risk Policy and Procedures

  • Periodic Review of Customers and RDC Usage

  • Training for Customers

  • Vendor Due Diligence/Suitability

  • Business Continuity

  • Risk Measuring and Monitoring Systems

Summary – Risk & Reward

  • Great Technology

  • Many cost and time savings features

    • If approached and implemented correctly

  • Benefits for FIs and Customers

  • No Law or Case Law Yet

  • Risk must be managed to protect FI interests and satisfy Customers


  • More Information


  • [email protected]

  • Wendy Wishon, AAP


  • [email protected]

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