Remote Deposit Capture (RDC)

Commercial banks have been relying on a wave of digitization in order to provide the best-in-class service to their customers. They provide several services which allow their customers to shorten their credit to cash cycle. One such service which has been enabled by the advent of technology is called remote deposit capture (RDC).

Remote deposit capture was introduced in the year 2004. Ever since this technology has been offered by many commercial banks as a value-added service to their customers. Today, the usage of this service has become so common that it is considered to be a standard offering provided by commercial banks to mid and large-size organizations.

In this article, we will understand what remote deposit capture is, how it works and what are the various benefits it provides to the user.

What is Remote Deposit Capture?

In order to understand the remote deposit capture process as well as the innovation that it brings along, we need to understand the traditional check process.

In a traditional check process, the corporation receives paper checks from their customers. They then accumulate these checks and send the same to the bank. The bank then processes these paper checks by sending them to the clearinghouse. Only after the checks have been cleared by the clearinghouse, are the funds released to the corporation. The entire process requires tedious transportation of paper checks which are quite difficult to reconcile as well.

Remote deposit capture is a digital methodology that eliminates the need for the paper transportation of checks. Customers do not need to accumulate their checks before they send the same to the bank. Instead, the bank installs a scanner at the client’s location. The customers can then use this scanner to scan their checks and receive instant credit on their account.

How Does Remote Deposit Capture Work?

Banks offer remote deposit capture services to select clients. These services are not offered to all clients. When a bank offers this service to the client, they typically install a scanner at the premises of the customer.

Most banks charge a monthly fee for installing this machine. However, this fee may be waived off depending upon the volume of business being given by the corporation to the bank.

Once the check is scanned by the customer, the information reaches the bank digitally. The bank then uses this information to draw up a duplicate copy of the original check which is then sent to the clearinghouse for further processing. In most cases, banks make an immediate credit to the customer. However, this depends upon the credit rating of the customer and their relationship with the bank. Even if immediate credit is not provided, credit is provided within a couple of working days.

Most banks allow their customers to destroy the checks within a couple of days after they have been processed. However, some banks request customers to hold on to their checks for a longer period of time.

Benefits of Remote Deposit Capture

Remote deposit capture is being widely used by corporate clients all over the world. This is being done because there are several economic benefits of using this facility. Some of the economic benefits have been listed below:

• Fewer Administrative Costs: From the corporate customer’s point of view, receiving checks from their clients is a tedious process that involves administrative costs. These costs involve collecting the checks, reconciling them, and then transporting them to the bank.

  Companies have to employ people to perform these administrative tasks. However, when remote deposit capture is implemented, this process can be automated. Hence, there is no need to employ this additional admin staff. The end result is cost savings for the corporate customer.

• Faster Cash Flow: On average, traditional paper checks take anywhere between five to seven business days to clear. Funds take a long time to reach the customer. As a result, they have to deploy more money to fund their business transactions. This leads to an increase in their working capital requirements. Since there is always a cost associated with working capital, the delay in the funds costs the company in dollar terms. On the other hand, if the company deploys remote deposit capture, it can reduce the company's working capital requirements and reduce its overall cost of capital.

• Streamlined Process: The corporate customers of commercial banks often use the remote deposit capture process to streamline their accounts receivables process. They do not need to wait for a long time so that they can accumulate enough checks to warrant a visit to the branch. Instead, they can simply scan the check as and when they receive it. This helps faster clearing of open items at the customer’s end which enables a better and more streamlined process.

• Lower Bank Charges: The remote deposit capture process is not only cheaper for corporate customers but it is also cheaper for the banks as well. Banks also have to spend a lot of money on managing the paperwork as well as reconciling the checks. All this extra administrative task is eliminated since banks receive the information in an electronic form which makes it much easier to manage. The end result is that the bank also has to incur lower costs. As a result, they often incentivize their customers to switch over to remote deposit capture by charging lower fees as compared to traditional check clearing.

The fact of the matter is that remote deposit capture is an important service from a commercial banking point of view. The revenue per check is very small. However, since banks process millions of checks, this service has the potential to become a cash cow. Also, once the system is set up, there is no extra effort required from the banks and the processing can continue effortlessly.