Now that remote deposit capture has been widely adopted and the infrastructure is now in place, why do members continue to bring paper deposits to the credit union when electronic deposits are quicker and more cost effective?
That question has much to do with legacy equipment issues that have now been resolved and which have put credit unions in a strong position to build more marketshare if the right steps are taken.
Remote deposit capture (RDC) was originally deployed as a customer/member retention product following Check 21 legislation being signed into law. In 2004-2005 financial institutions (FIs) offered RDC, although the infrastructure and image-clearing network necessary to clear checks electronically was, at best, in its infancy. What is not up for argument is that the bridge solution for this gap-printing nearly all items as Image Replacement Documents (IRDs) to continue and complete the clearing process-was painful. The practice was overall wasteful in process, time and especially cost, but was competitively necessary as all of the larger institutions began offering this revolutionary deposit enhancement to retain, and if possible, grow market share.
The situation has flipped. Financial institutions, including credit unions, now have the enhanced infrastructure and image-clearing networks necessary to clear all but a few specific item types electronically. But, although remote deposit capture has been around for nearly eight years, many members remain hesitant to convert, leaving untapped capacity and significant potential for growth.
Resolving A Disconnect
Credit unions cannot continue to accommodate their large paper-based depositors as they have in the past. The paper-based clearing mechanisms the industry developed over decades continue to be dismantled as CUs deploy more distributed capture models. All of this creates a disconnect between the commercial paper-based depositor and the CU that would prefer to maintain the relationship and engage commercial deposit members.
So why hasn't RDC been more widely?
One of the challenges to adoption includes the limitations of check-scanning equipment in terms of sacrificing speed for quality or vice versa. Previous scanning technology has been slow and cumbersome-unable to handle large check volumes. While the software applications have evolved, the scanning technology has not stayed on pace. In many situations, checks simply are not available until later in the day, and even though RDC deposit deadlines are often extended past traditional paper deadlines, there still is not enough time to make same-day cutoffs.
New Solution Available
However, a new complementary technology solution is available that can assist credit unions in transitioning their paper depositors to electronic. This solution is a win for the members who have yet to realize typical advantages of electronic deposit, such as extended deadlines, lower price points and potential transportation savings, without jeopardizing their process. The solution also helps the credit union-allowing it to comfortably continue the migration from its legacy paper-based systems to the more efficient processes.
In an effort to address these gaps, more and more credit unions are expanding their acceptance of commercial ICL deposits. It is a way for CUs to compete with banks by offering the same deposit options. Unfortunately, until now the only way for commercial deposit members to effectively produce ICL deposits was with larger, more expensive item-processing equipment or with slower low-volume check scanners paired with separate software packages not ideally suited for use by retailers, merchants or other commercial depositors.
By embracing ICL deposits as a complement to RDC, CUs can increase member retention while expanding deposit growth potential. RDC-resistant members will be interested in this alternative, as it offers a more streamlined process and does not sacrifice quality for speed. Credit unions benefit in two ways: One, a new, high-speed end-to-end electronic treasury solution for their members and two, the CU is able to offer a service to customers that many banks do not, creating a competitive advantage.
To maintain and grow their base of commercial depositors, credit unions need to offer an alternative to RDC that satisfies more of their members' needs. Recent technology breakthroughs make these services more affordable and practical. New hardware/software solutions can efficiently scan and image deposits and create/send the ICL deposit to the credit union. This makes the move to electronic deposit processing viable for even the most check-intensive businesses, while simplifying the effort for all parties.
Credit unions exploring ICL deposit technology options should look to a proven leader with whom to partner for delivering a complementary solution to current RDC offerings. Look for a simple and intuitive ICL solution that is easy to install and can start generating a positive impact on all fronts. An experienced partner will assist in the implementation process by installing the hardware and software for proper testing without taxing internal resources. By offering this alternative, credit unions now have a turnkey solution for members that have been resistant to electronic processing.
Commercial ICL deposits are the next wave of innovation that can help credit unions operate and compete even more effectively in a market where members may feel such services are offered only by banks.
Matthew Gniech is product manager-check image with Cummins Allison. For info: www.cumminsallison.com.