As money increasingly goes digital, with online-only banks and apps that allow money transfers by tapping phones, customers have a new way of handling paper checks. Instead of using an ATM or a bank teller to deposit a check, customers of a growing number of institutions can endorse the back of a check, take a photo of the front and back, and then upload the images via their bank's or other financial institution's mobile app.
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According to Beth Robertson, director of payments research at Javelin Strategy & Research, USAA became the first U.S. financial institution to offer remote deposit via a mobile device when it introduced its Deposit@Mobile app for the iPhone in 2009. "Consumers view this as a desirable value-added service, so you are going to see a larger number of banks continuing to offer this capability," she says.
In the past few years, large financial institutions like PayPal, PNC, ING, Chase, State Farm, and Bank of America, as well as credit unions and smaller regional banks, have added this capability to their mobile apps. Many offer the service for free, but some tack on fees.
To prevent fraud, most banks limit the amount you can deposit digitally by the day or the month. Other fraud-prevention strategies ensure that "somebody could not take a picture of a check and deposit it multiple places," says Robertson.
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Processing time varies by institution. At PNC, which rolled out the feature in May 2011, the cut-off time for same-day processing of remote check deposit is 10 p.m. EST. Deposits after 10 p.m. are processed on the next business day, says PNC spokesperson Tim Rice. Accounts open less than 90 days have a limit of $500 per day and $1,000 per month, but accounts open fewer than 30 days are not eligible for the service. Accounts open more than 90 days have a limit of $2,500 per day and $5,000 per month.
Bank of America, which enabled remote check deposit in July, allows deposits of up to $5,000 per month for personal checking accounts. Funds appear in the account as deposited right away with credit pending and are available on the next business day. Marc L. Warshawsky, senior vice president and head of mobile solutions at Bank of America, says the bank added this service as a convenience for its customers, who "can validate the status of the transaction by viewing the account details in mobile banking."
According to Stephen Haag, professor-in-residence of business information and analytics at the University of Denver's Daniels College of Business, remote check deposit poses the same security and privacy risks as online banking. "There's no more inherent risk from a security or privacy point of view than any of the other digital banking modes, which means that the security risk does exist," he says. "But we're all willing to trade security and privacy for convenience. It's definitely a mild risk."
Seth Siegel, a director and mobile banking expert in Deloitte's New York offices, says mobile and online banking features have allowed regional and online-only banks to become more competitive, since consumers no longer need ATMs and bank branches for basic transactions.
Will these features eliminate the need for bank branches altogether? Not likely, says Haag. "Way back in the late 70s, we said ATMs would do away with bank branches," he points out. "In the late 90s, we said online banking would do away with bank branches." Neither happened, and Haag predicts it will be the same story for mobile banking, in part because even people who do most of their banking digitally occasionally need to use a bank branch. "We still need to get things notarized, [access] safe deposit boxes, or trade in coins," he says.
Remote check deposit has already begun to transform the way banks and their customers interact. With a mobile banking app, consumers can check their balance, transfer money between accounts, and remotely deposit checks. However, they still can't produce cold, hard cash through a phone, and odds are, they'll have to walk into a branch to discuss their options for a home equity loan. So don't kiss the brick-and-mortar banks goodbye quite yet.