Remote check deposit raises security concerns

The federal law that cleared the way for remote deposit of checks received by business has been on the books for nearly three years, and both banks and their business customers are beginning to warm to the idea.

Banks that moved cautiously to introduce the service and that was most of them worried about security of the service as well as the costs of the associated technology.

But the early adopters such as Nevada State Bank increasingly face competition from a large number of banks, both large and small, that are delivering remote-deposit systems to their business customers.

"We were cautious. We wanted to make sure we had well-defined liabilities for us as well as the customer," says Stan Wilmoth, president of Heritage Bank of Nevada. The bank is preparing to roll out a remote-deposit program in the fourth quarter.

For some banks, a worry with the program is security because business customers are required to hold onto the checks they scan for several days or more after they receive them from customers. No longer do they end up in a bank vault at the end of the day.

City National Bank, meanwhile, got the technological muscle to roll out direct-deposit after Los Angeles-based City National acquired Business Bank of Nevada this year.

As a stand-alone, Business Bank had struggled for more than a year studying the costs and challenges of acquiring remote-deposit from an outside vendor, says Paul Stowell, a spokesman for the bank.

With a remote deposit system, a business scans checks that come in the day's mail, electronically transmits the information to the bank and receives instantaneous credit.

It's proven to be a hit with business banking customers.

"We were looking at it as a time-saver," says Bill Newberg, the chief financial officer of Grove Madsen Industries. The Reno-based electrical wholesaler selected a Web-based remote deposit program introduced by Wells Fargo not long after the service was introduced in 2005.

Once the system was installed, Newberg says the company was able to quickly deposit checks that arrived late in the day.

"The people who use it love it," he says. Well Fargo says it has more than 2,000 clients for the service nationwide, and they've deposited more than 21 million checks with the service.

Corby White, a senior vice president for City National in Reno who's spearheading sales of the remote-deposit product, says the PC-based product finds particularly good acceptance in professional and medical offices that receive a lot of checks.

"There's a lot of pent-up demand for this," White says.

Nevada State Bank, among the first to introduce remote deposit services, today sees rising demand as well as more competition, says Hanan Sabri-Scott, senior vice president and treasury management manager.

"We're getting asked for it," she says. "Our clients are moving faster than the banks at this point."

Early adopters of the program, she says, included tech-savvy businesses, but the demand now cuts across a wide swath of small and medium-sized businesses.

"At this point," Sabri-Scott says, "it's caught with everybody."

Many larger businesses, she says, continue to prefer lock-box services.

And even while Heritage Bank prepares its remote-deposit offering, Wilmoth says that the some of the bank's customers prefer to rely on a free courier service that provides much the same service as remote deposit.

"We've done remote deposit the old-fashioned way," he quips. "We picked it up."