While Remote Deposit Capture brings many exciting new opportunities to small community banks, it also brings increased challenges. Even though there are challenges and operational considerations, we must face the reality that the larger banks are aggressively promoting Remote Deposit (Merchant Capture) and targeting our core deposits. We must position our banks to meet the challenges. Face the facts, Remote Deposit Capture is here to stay, and will keep growing. The larger banks are aggressively promoting it, and if we offer Remote Deposit, the regulators will be scrutinizing our operational processes.
If Remote Deposit is implemented properly with the basic infrastructure in place, the bank can increase and sustain its core deposits, effectively compete in the Remote Deposit arena, minimize risk and satisfy regulatory requirements.
If you are considering Remote Deposit, go through the short term pain and implement a program that will sustain the growth. You may already be offering Remote Deposit Capture, just re-evaluate the program and be sure the infrastructure postures your bank for success while minimizing risk.
A Remote Deposit operational infrastructure, which addresses program growth, controls, and regulatory requirements include, but are not limited to:
- Policies, procedures and controls which integrate documentation and processes from the lending department to deposit operations
- A monitored and perpetuated selling component which gets the same level of focus that loans in the pipeline receive
- An aggressive bank-wide training program which includes teaching lenders the importance of Remote Deposit as it relates to enhancing banking relationships, building core deposits and retention of business customers
- Proper staffing of Cash Management Departments to support the day-to-day functions and servicing of business customers
- Customer evaluation and underwriting process to minimize risk and potential losses
- Established daily thresholds monitored by operations
- Review of your blanket bond insurance coverage to minimize liquidity risk, if the bank sustains a material loss from fraud
- Fraud related security-exception reports to monitor and minimize risk integrated into the operations department
- Consideration of "holds" on transmitted funds
- Annual creditworthiness review and audits of customers
- Perpetual staff training to focus on Remote Deposit Capture features and opportunities to grow the bank and its core deposits
- BSA Officer review for changes in patterns and trends to minimize money laundering and illicit activity
- Required regulatory risk assessments of the Remote Deposit Service Providers and the Remote Deposit product offering which is considered an electronic banking product
We have to think of obtaining and sustaining customers while implementing a basic infrastructure to control risk and address regulatory compliance requirements.
With challenges come opportunities when promoting Remote Deposit. The bank will enjoy core deposit growth, sustain their current customer base, reduce lines at their counters, have a potential new source of fee income, be able to compete in the market and have new opportunities to increase loan volume.
Article Submitted by: Carolyn C. Dowdy, President of Bank Project Solutions
T: (770) 653 2389