It was a national disaster – the September 11, 2001 attacks – that prompted the United States to build an electronic check-clearing system, rather than relying on a physical system vulnerable to disruptions. The Check Clearing for the 21st Century Act, or Check 21, took effect three years later.
Nearly 20 years later, Check 21 is being put to the first real test of its intended purpose, as the COVID-19 shutdown has brought in-person banking to a virtual standstill. It’s a somewhat different challenge from 9/11, which primarily disrupted back-end clearing mechanisms. Nonetheless, banks around the country have been employing Check 21 technology to shift their customers’ activity online.
Digital Check talked to managers in charge of check processing and remote deposit capture (RDC) operations at several larger regional and national banks in late April. All of the institutions we interviewed have seen drastic changes in customer behavior, as well as severe restrictions on branch banking. As a result, RDC has been thrust into the spotlight as a way to handle the transactional load.
Since desktop RDC is often a paid service, getting the message out has been a delicate balancing act, said one senior product manager at a major institution.
“We aren’t really reaching out proactively, with collateral and sales programs, because, quite frankly, we want to be sensitive to the customers,” she said. “We really want to make sure they don’t think we’re looking at this as an opportunity to sell them something.”
The first wave of RDC inquiries at most institutions came from customers who reached out for advice about financial continuity. A critical initial step was making information easily accessible.
“When a customer comes to us with virus questions, we want our representatives to have all those answers at their fingertips.” said one manager at a top-10 U.S. institution. “So, we had to ask, ‘What are the tools that will help our clients the most?’ And today, they might sit in four distinct product groups, but we’re not going to tell people to look in four different areas. So we combined of these capabilities and training materials, consolidating them under the title of COVID-19 – so when a customer came to us with a question relative to that, they only had to go to one place.”
The group manager of a large regional bank in the Midwest echoed those sentiments, noting that her institution had avoided general sales pitches in favor of targeted reminders. For example, users who signed into their business banking portal were greeted with a banner listing online services that might be useful. That bank has begun allowing existing customers to complete the RDC sign-up process entirely online. It’s also sped up the approval and deployment of RDC.
During the outbreak, the bank has adjusted some of its financial risk profiles for existing customers. Since they’ve already been screened for compliance with regulations such as KYC and KYA, qualifying customers for desktop RDC has proven a good indicator of low fraud risk.
“Once you’ve done that, there’s very little fraud associated with desktop RDC. If someone’s going to defraud a bank, they’re not going to order a desktop scanner and make deposits. They’re going to do it through other methods.”
Across all banks we interviewed, the overall volume of checks processed was down noticeably – as were payments overall – but the number of RDC users had generally increased. Common observations were dormant users resuming activity, and existing RDC users needing more locations added. One bank’s customer requested 130 additional check scanners to enable employees working from home to process deposits.
The influx of RDC users has caused occasional hiccups. “One thing we’ve seen that’s different is just more problems – but I don’t mean that in a bad way,” said a group leader involved in RDC technology at one major bank. “It’s just that we have people depositing checks that didn’t previously… We’re seeing people are obviously trying to transition [to remote] work, and so we’re seeing new issues related to that.”
While not every financial institution changed its RDC products or policies, being flexible was a priority. Most noted increased interest in mobile RDC among small businesses – and sometimes even corporate customers that had suddenly seen their workforces scattered.
Nearly every bank we spoke with had at least one story about making what would have been considered drastic exceptions. One waived small business banking fees through the end of the year for customers facing financial hardship. Others have temporarily canceled fees or put services into “hibernation” for customers that had to close their doors.
One institution gave away remote deposit for free to certain customers who found themselves in a bind. That bank’s product group leader emphasized it was not an organized promotion, but exceptions made on a case-by-case basis. Nonetheless, it had a simple justification.
“We are trying to put services in their hands that they can use to do business from anywhere, but not looking at it as a sales opportunity. Help the customer out, and if they want it later, worry about charging for it then,” he said. “There could be a similar theme in how people choose their bank in the future. What did they do for me, what did they do for other people, in this difficult time?”
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