Immediately after the terrorist attacks of Sept. 11, planes were grounded and the country came to a standstill. As a result, all paper checks were in limbo, unable to be transported to Federal Reserve. On Oct. 28, 2004, Check 21, a new U.S. federal law, was enacted by Congress. It allowed electronic scanned images to replace original paper items.
“Remote deposits allow for quicker processing and lower costs by eliminating manual sorting,” says Kay Henley, senior vice president at Wells Fargo Bank in Houston. “The quicker collection and returns processes have also helped reduce the number of fraudulent items.”
Smart Business talked to Henley about the effect remote depositing is having on the banking industry.
How does a remote deposit work?
The Wells Fargo service is called Desktop Deposit® and it is a way of making deposits from a remote location over a secure Internet connection. The customer receives a scanning machine and the service is delivered through Wells Fargo’s Commercial Electronic Office® (CEO®) portal via the Internet. The customer can create a deposit, scan and review checks, submit the deposit and receive deposit confirmation. Customers can scan checks all day and leave them in the system prior to submitting them before the cut-off time of 9 p.m. CST.
Each batch is posted to the customer accounts separately so that customers can easily reconcile their accounts. To facilitate reconciliation with accounts receivable, customers can customize their data entry fields to match the existing field in the accounts receivable system. Account filters allow users to choose from different accounts via a drop-down list for check payments, saving the user from having to maintain multiple sign-on IDs and passwords to make deposits in different accounts.
What happens to the check once it’s received?
The process of removing the paper check from its process flow is called truncation. In truncation, both sides of the paper check are scanned to produce digital images. Once a check is truncated, businesses and banks can work with either the digital image or a digital reproduction. Images can be exchanged between banks, savings and loans, credit unions, third-party servicers, clearing-houses and the Federal Reserve.
What are some of the advantages of remote deposit?
There are many, including no more waiting in line at the bank, faster notification and improved collection of returns items. It is an easy, secure way to make a deposit when there are no banks in close proximity to your business location, or even when there’s a branch down the street. The system eliminates the inherent risks of transporting paper checks and the extended deposit deadlines allow for additional funds to be included in the day’s deposits. Any excess funds can be swept into an overnight investment account.
Working through our CEO portal gives users immediate access to account balances and improves customers’ decision-making ability on their day-to-day operations. In addition, customers will be able to improve reconciliation between check payments and their account receivable system.
To further enhance the security of the deposit process, company administrators can assign the abilities to create and approve deposits to different users, strengthening the internal controls of the company depository process. Customers can search for and view images of their deposit items. This system works for both large and small companies, since it saves time and money and adds security through control. No more trips to a brick and mortar facility by either employees or couriers. If you are a business that has multiple locations nationwide, you can bank from another state.
This service is ideally suited for the company that has checks to deposit but not a lot of cash. You can have immediate PDF copies of deposits containing up to 50 checks and copies of all individual checks up to 180 on the CEO portal.
Are there disadvantages?
This service does require the use of scanning equipment; however, the advantages far outweigh the cost of the equipment and it pays for itself over time. Wells Fargo customers can choose to lease the equipment instead of own, which would help reduce the initial outlay for the service.
How long should customers hold on to the original checks?
An important issue associated with the Desktop Deposit is the safekeeping and destruction of the original checks. Original checks should be retained for an agreed upon period of time in case there’s a problem with image quality. After retaining for an appropriate period of time, the checks should then be destroyed to prevent duplicate entry into the payment-processing stream.
KAY HENLEY is a senior vice president of Wells Fargo Bank. Reach her at (281) 282-2208 or Kay.Henley@wellsfargo.com.