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

The Risks and Rewards of Remote Deposit Services

2009 Treasury Management Conference

September 10, 2009

Omaha, Nebraska


Agenda

Agenda

  • What are Remote Deposit Services?

    • Remote Deposit Capture

    • Branch Capture

  • Background on Remote Deposit

    • Benefits

    • Risks

    • Responsibilities

    • Agreements


What is branch capture

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

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 Deposit Process

Remote Printing

Paper

Paper

Paper

Image

Paper

Image Exchange

CheckWriters

Image Exchange

Depository Bank

Retailers/Merchants

Paying Bank

Paper

Paper

Paper

Transit

Paper

Direct Send


How does rdc work

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.


The risks and rewards of remote deposit services

Any Bank

FRB Account

Processor

Credits & Debits

Check Advices / Adjustments / Item Fees

Forward

FRB

File

Acknowledgement

Messages

X9.37

Transit Items

Return

Returns (Paper / Electronic)

Paying Institution

Any Bank

BOFD

Endorsement

X9.37

Transit & On-Us Items

Merchant

Any Bank

BOFD

Remote Capture Vendor

Or

Financial Institution

Image Archive

DDA Posting

Statements

Deposit Activity

Online Banking


Clearing and settlement

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

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 exchange1

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

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 fi1

Rewards of RDC - FI

  • Reduced Processing and Clearing Costs

    • Lower fees for image exchange

    • Transportation costs reduced

    • Staffing reduction


Rewards of rdc customers

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 customers1

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 customers2

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

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 customers1

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

RDC Issues - FI

  • RISK – FFIEC Guidance Issued

    • Pre-Implementation

    • Post Implementation

  • No legal foundation for RDC

    • Regulations/Law/Legal Precedent

    • Agreements


Risk pre implementation

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

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

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

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


Questions

Questions?

  • More Information

  • www.epcor.org

  • [email protected]

  • Wendy Wishon, AAP

  • EPCOR

  • [email protected]


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