Picture this: Soon, consumers will be depositing paper checks straight into their bank account by taking a couple of photos with a smartphone.
The technology is already available at USAA, an insurance company and bank that primarily serves military personnel and their families. Larger banks such as Chase and Citi intend to add the technology—known as remote-deposit capture—later this year.
Banks have already offered smartphone applications that let customers check balances, transfer funds and make payments. This new addition would take mobile banking a step further.
“The smartphone really becomes a mini ATM in your pocket,” said Bhavik Patel, product principal for remote capture for J&B Software, a company that has developed technology to do mobile remote deposits for banks, brokerages and other institutions.
Here’s how it works: A bank customer takes a photo of the front of the check and the back of the check that has been signed by the customer. The photo gets sent to the bank through its mobile application. In most cases, funds are in the customers account immediately.
Tom Kelly, a spokesperson at Chase said the company would offer the service to consumers at the end of this year. Sources say that Citi is planning a limited roll out of the technology later this year, as well as a way for customers to scan paper checks from their home scanners an deposit them through the bank’s website. A Bank of America spokesperson said the company “continues to evaluate new mobile technology.”
According to an August 2009 survey of 174 banks conducted by financial services research firm Celent, 28 percent said that they are at least considered offering a mobile remote deposit solution, while over half of the banks said they were considering remote deposits for consumers through a desktop scanner.
Scanners have already been sold by banks to business customers who then deposit a large amount of checks deposited without entering a bank branch. Experts say that most businesses are using scanners to make check deposits, a practice that began in 2004 after the Check Clearing for the 21st Century Act was enacted, allowing checks to be cleared and settled through images.
In the case of smartphone deposits, USAA had some $400 million deposited through smartphones since the service launched in August 2009, according to Jeff Dennes, executive director of mobile services at USAA. As of today, 12 percent of all deposits are coming from smartphones, said Dennes. The technology, so far, is available on Apple’s iPhone and smartphones that use Google’s Android operating system. The inhouse development team is working on getting the mobile deposits on Research In Motion’s BlackBerry devices.
While USAA has seen success with the technology, it remains to be seen if American consumers will rush to use it. Part of why it has taken off at USAA is because the bank has no branches, making it even more essential to be able to deposit a paper check at any time.
Research seems to show that the technology is something consumers want. A recent survey found that 22 percent of those with mobile phones were likely to use mobile remote deposit, according to financial services consulting and investment firm Mercatus LLC. As for those already using mobile banking on their phone, 59 percent were likely to also deposit paper checks through their phone.
As with any new financial services technology, security is always a hurdle with consumers. “Internet and mobile banking tends to be hampered by security concerns by a proportion of the population,” said Bob Meara, a senior analyst at Celent. He added that for the many who use online and mobile banking already, “they’re quite convinced its safe,” said Meara.
“Those concerns are easily overcome,” adds Mike Friedman, a senior analyst at Mercatus LLC. “The functionality will far out weigh the security concerns.”
Those offering the technology say that their products are secure. J&B Software’s technology encrypts the image when it’s sent from the smartphone so that it’s unreadable, said Patel. The image is also not saved on the smartphone, in case the device is lost.
More banks are expected to add the feature, especially as consumers demand 24 hour banking. “They’re time shifting to pay their bills on the bus ride instead of at home,” said Friedman.
“The banks that deploy this are going to attract more consumers than banks that don’t deploy this,” he added.