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 [email protected].