In 2004, the United States of America passed legislation to enable the adoption of technology to reduce the movement of paper checks. The technology not only allows check truncation to facilitate remote deposits, but also enhance security, reduce costs, and mitigate risk, aspects of interest to corporate offices around the world.
In countries where business growth is rapid and consumers are spread across a wide geography, remote check deposit can simplify the deposit process and help companies capture deposit details irrespective of the location they are presented, a valuable benefit for consolidation of accounts and cash management.
A New Technology
Remote Deposit Capture (RDC) technology has been around for more than a decade now and the features and functionality have matured significantly, a benefit to global regions just beginning to accept the technology. Top RDC vendors provide solutions that cater to every type of customer and their differing volumes while filtering items to a central processing platform. While a mobile RDC solution is ideal for the retail business client with a low number of checks to submit, a web application is more suitable for mid-sized companies who handle a moderate amount of business transactions. Commercial businesses with a high volume of deposits may require a desktop client on an on-site workstation. The most efficient RDC systems provide an easy and intuitive user experience to submit deposits to a centralized processing platform. A centralized platform provides the advantages of system-wide administrative features and reporting capabilities across deposit stations, no matter where they are located.
Growing Global Adoption of RDC
Brazil, Canada, China, India and Mexico are all in various stages of implementing check truncation. With growing economies, these countries are experiencing an increase in financial services transaction activity. Additionally, in these countries, the geographic spread of financial services locations is vast and transporting checks from one location to the other is costly and time-consuming.
In Brazil, deferred payment purchase plans are very popular and hence this translates to a number of postdated checks being issued. The size of the country and the time for transportation makes RDC a very useful solution here.
In Mexico, RDC was introduced for businesses in 2005 and has seen a lot of success in usage. And modernizing Canada's payments system is a key focus for the Canadian Payments Association.
India has had a successful pilot run of check truncation in New Delhi and is poised to extend it to other parts of the country. Banks in India now have made it mandatory for customers to use physical checks that are image-technology compliant. Today Banks in India which do not have presence in large part of the country depend on Bank-appointed agents (coordinators) to pick up checks from customers of Corporates and clear these checks through a correspondent bank. Alternatively, checks require transport to the bank’s processing center. In both these scenarios, the time required for giving the finality to the check will be four to five days at best, leading to inefficiency in accounts receivable. Properly applied, RDC would make a significant impact on these processes.
Benefits to Corporates
There are five major benefits for corporates seeking to adopt RDC technology:
• Improve cash flow – Receive faster access to funds and longer deposit acceptance windows.
• Streamline accounts receivable – electronically capture accounts receivable data during the electronic deposit process, eliminating redundant data entry and saving on cost of labor. RDC capability from within an accounting software package provides even more efficiency.
• Reduced processing costs – eliminates transport of paper checks to the bank, which reduces cost of labor and the cost of transportation, etc.
• Paperless record keeping – shifts to electronic reports of deposit activity and check images, which is more efficient, more easily searchable, and requires less storage space.
• Environmental preservation – reduces a corporate’s carbon footprint related to transportation and paper consumption.
More Secure Than Paper-Based Processes
Early reluctance in the US to electronify paper-based processes was soon replaced with realization that the technology’s systematic controls were more accurate and efficient than human review. Advancements in imaging technology and configurable controls ensures that risk items, such as duplicates, fraudulent items, and high dollar items, are flagged and reviewed by a human before entering the deposit stream.
Competitive RDC solutions provide comprehensive reporting to ensure the corporate has ready access to details of violations, trends, exceptions, and risk items, as well as full access to the history of items deposited and status of items in process.
To ensure secure access, RDC must encrypt data transmissions of data and images as well as provide strong authentication and multi-factor authentication capability. The corporate must have the ability to mask sensitive data fields for security and confidentiality of its customers.
As RDC adoption accelerates on a global scale, corporates will find a competitive edge in the ability to efficiently manage accounts receivable and optimize working capital. High quality RDC platforms provide the security, reporting, and audit trails necessary to replace paper-based processing of check payments.
Arvind Ronad is a senior executive in product strategy and marketing for Fundtech.