United Bank Debuts Remote Deposit

September 16, 2005
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GRAND RAPIDS — United Bank of Michigan expects to become the first local community bank to offer West Michigan business customers the convenience of making deposits from their place of business.

It’s called “remote deposit service” (RDS), and United Bank will begin with a couple of sites in mid-October, said Chairman and CEO Art Johnson.

Johnson said that up until now, deposit pickup service has been the best option that most banks offer their business customers. RDS service, however, reduces courier fees and other costs associated with the daily or weekly transporting of checks from branches and ATMs to the bank’s processing facilities.

“Pickup is a very convenient service, but this is really a big, big step beyond that,” he said. “It’s on your own schedule, as often as you want, whenever you want. In fact, it’s every bit as easy to do as just writing out a deposit ticket.”

Remote deposit service, also known as remote deposit capture, comes on the heels of Check 21 legislation, which gave financial institutions the go-ahead to process and clear more checks electronically based on images of items for deposit. Check 21, effective Oct. 28, 2004, was intended to make check processing faster and more efficient, according to the Federal Reserve.

“Since we already had the Check 21 technology, this was the next logical extension,” Johnson said. “It fits into our business model very, very well, and it was something we pursued quite aggressively in order to be a very early adapter for our customer. I think it will be something that will become very widespread in a relatively short period of time.”

United Bank will provide customers of the service with a desktop check scanner that connects to the customer’s computer and scans the front of checks. After the images are captured, the Remote Deposit System produces an image-based deposit and transmits it over the Internet to United Bank. United receives the image deposit and posts it to the customer’s account.

The system doesn’t require installation of any additional software aside from the setup software for the scanner. Johnson said that initially the service will be targeted to business customers because the scanning device is unique, and there is some cost in placing the scanning device on the customer’s desk.

“It sort of necessitates that there is some volume of deposits that will be run through the system,” he said. “But the price of that machine, like all other technology, I think will come down as more and more places offer it. That will ultimately make it more widely available.”

The cost of RDS service hadn’t been completely finalized as of last week, but Johnson said it will be a monthly charge on top of United Bank’s regular service charge. The price will be in the neighborhood of $50 a month, but it could be waived for customers with higher balances, he said.

“I really don’t have a feel yet for exactly what those balances would be. Fifty dollars sounds like a lot, but on the other hand, if someone is saving an employee from having to spend a half hour five times a week running to the bank, it’s probably pretty cheap, and it does help us defray the cost of the equipment that has to go in there.”

The best candidate for the service is any business that’s largely a non-cash business and doesn’t need to go to the bank on a daily basis other than to make a deposit of the checks received.

“It will vary somewhat based on the number of checks, the dollar amount of those checks, the proximity of the business to a convenient banking location. It’s going to be very easy to do, and in fact they could conceivably do it more than once a day.”

Business customers accessing the service will be able to deposit checks electronically with United Bank until about 6 p.m.

Johnson said the service is especially convenient because in terms of making a deposit, the bank is no further away than the customer’s desktop. There’s no footwork involved and receivables are collected more quickly and easily.

For United Bank, RDS spells convenience, too. The bank accrues savings because the process of clearing check images is cheaper than clearing paper checks. On top of that, the Federal Reserve Bank charges less to clear items as images vs. as paper. The Fed clears nearly half of all inter-bank checks written in the United States.

The Fed took action in 2003 to reduce costs by discontinuing the processing of paper checks at 13 Federal Reserve offices. Two further rounds of restructuring last year and this year will effectively reduce the number of check-processing locations to 22 by the second half of 2006, according to the Federal Reserve Board.

The Fed vowed earlier this year to continue its strategy of capitalizing on the efficiencies afforded by electronics and to align product pricing more closely with the value and costs of processing items.

Johnson said United Bank plans to move very rapidly into making remote deposit very widely available to its customers.

“We have an idea who many of our best prospects for this will be, and we’ll be in contact with them. The few that we’ve talked to just can’t wait for it. We also certainly hope that we’ll be able to attract some new customers with this.”    

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