Remote deposit is next big thing

Experts in the banking industry are predicting that remote deposit will be the “next big thing” in payment processing, especially benefiting the small business owner.

Remote deposit is a service that allows businesses to scan checks and deposit them electronically into their bank account via a secure Internet connection.

A recent article in American Banker reported that small firms are flocking to remote deposit services, surprising some bankers who assumed that large companies would be the obvious first target.

“The outpouring of interest from small businesses was really a surprise,” said Bill Martin, the president and CEO of Nevada State Bank, a unit of Zions Bancorp. of Salt Lake City, according to the American Banker article.

The service is still relatively new, and MRA, together with the Michigan Bankers Association, is among the first to offer it statewide to Michigan businesses. But in areas where it has been more aggressively promoted, small businesses have welcomed the opportunity to take advantage of the changes in banking brought about by “Check 21.”

Check 21 is the common name for the law that allows an electronic image of a check to substitute for the original check. Before this federal law went into effect in 2004, every check had to be physically transported from the recipient to the deposit bank and on to the issuing bank—the reason checks used to take nearly a week to clear.

More than two years after Check 21 went into effect, however, most small businesses have not had an easy way to take advantage of the change—they still had to make daily bank runs. Remote deposit allows a business to take advantage of Check 21, saving time and expense for all parties.

Businesses who sign up for MRA’s remote deposit service will pay a monthly fee and a small per-check fee to employ the new system. These fees combined are less than the labor cost of making a daily “bank run.”

There is a large market for the new service, according to MRA President and Chief Operating Officer James P. Hallan. While check-writing by consumers has declined in recent years, for small businesses under $1 million in sales, there has been virtually no decline in check writing, according to 2004 data.

“We have seen how electronic data transmission revolutionized credit card payments. Now we expect to see a similar technology shift as check payments move digitally through the banking system as well,” said Hallan.

Bob Meara, senior analyst in the banking group at Celent LLC, a Boston consulting firm, believes widespread adoption of this technology is close at hand. He estimated that about 730 million items were deposited remotely in 2006 and predicts that figure will rise to over two billion in 2007.

Nevada State Bank began offering the service to its commercial customers in July 2005, with 39 customers using it, according to American Banker. By November 2006, it reported 1,100 clients using the service.

Satisfied

Small businesses that were early adopters of the technology when it came to their area are reporting high levels of satisfaction.

MRA and MBA have partnered with iStream Imaging for equipment and software, so the Retailer contacted some small businesses that use iStream in other states.

Scott Adkisson, president of Financial Crimes Services in Red Wing, Minnesota, has used iStream’s remote deposit system at his business since November 2005. He said he was a little skeptical about the level of benefits his business would achieve with remote deposit.

“We never really thought about the hassle or expense involved in making daily deposits the old fashioned way,” said Adkisson.

“Now we don’t need to copy checks. No more deposit slips. No more trips in the rain or snow to stand in a bank line.

“My bookkeeper completes all of it in 5 to 10 minutes without ever leaving her desk. Remote deposit saves me time, saves me money and makes it easier to run my business,” said Adkisson.

Mary Therese Bloechl at Woodland Dental Associates in Waukesha, Wisconsin, loves her office’s remote deposit system, which uses iStream equipment and software.

“Remote deposit really streamlined a lot of paperwork in our office,” said Bloechl. “It’s also much easier and faster to track down information later through the reports the system can generate.

“Each employee here logs on with an ID number and password, so if there is any question about a deposit or a check, we can easily see who made the deposit,” she explained.

Bloechl cautions that it’s not like a check verification service, where the business knows immediately if a check will bounce.

“Still, the money is in our account several days sooner than in the traditional system, and bad checks come to light sooner, so problems can be resolved sooner as well,” she explained.

Ron DeBruyn, owner of a small printing business in Frankfort, Illinois, has been using a remote deposit system from iStream since he started his business a little more than a year ago, and he thinks it’s great. Most of his clients pay by check, but he believes it would continue to be a time-saver even if his volume of checks were smaller.

DeBruyn finds the service extremely easy to use, and says he learned it quickly. “If I can use it without problems, anyone can!” he said.

For information about MRA’s remote deposit service, contact MRA’s John Mayleben at 800.366.3699 or jmayleben@retailers.com.