Unlike ARC and another early electronification effort called POP, which both converted only consumer checks into ACH transactions, remote capture under Check 21 is between one company and its bank: It doesn't require consent from the check writer, and it continues to process the payments through existing check-clearing channels rather than requiring banks to work out image exchanges. "This is where the excitement is today in cash management," reports Joe Cornelius, vice president in the product solutions group within Wachovia Bank's treasury services division. "Demand is huge and broad."

The remote deposit concept is extraordinarily simple: Using systems provided by the banks, companies will be able to scan a check moments after it is received and transmit the digital image to a bank anywhere in the country for deposit directly into a concentration account. Dozens of local depository accounts can be eliminated along with the fees for those accounts and the fees for funds transfers. Virtually every company that now sends someone to a branch office to make check deposits or that collects checks at remote offices should consider converting to electronic deposits, bankers contend. The payoff will be greatest for companies that aren't paid in cash, since cash will still require physical deposit.

The infrastructure is uncomplicated as well. Wachovia's hardware is a compact desktop scanner that captures images of the front and back of each check as checks are fed automatically through a jogger. Explains Christine Jenkins, vice president and market consultant in Wachovia's global payment services group, a deposit can consist of anywhere from one to 3,000 checks. A deposit is balanced, then transmitted via the Internet any time that it's convenient for the depositor, she explains. Because the payee gets ledger credit the same day a check image is transmitted for deposit, even late in the evening, "it really improves liquidity," she observes. It's simple, yes–but not necessarily without risks or costs. The costs of the capture device and the software, as well as the service charges, will be enough to require treasury staffs to go through a cost-benefit analysis, Treasury Strategies' Gregg asserts, and some companies will end up finding remote deposit more attractive than others. But she expects those costs to drop over the short term: While initially banks will apply value-added pricing, popularity and competition will bring commodity pricing, which will open up the possibility of remote deposit to a broad set of companies. Currently, there is limited information about costs since almost all products are still in the beta-testing phase.

Remote deposit also carries risks, with the most apparent one being image quality and the possibility that numbers are misread. If a loss would not have occurred if the paper version of a check had been used, then the image-maker–that is, the company scanning and depositing the check–must bear the loss, Gregg notes. That said, those who are in bank pilot programs seem convinced. Take, for instance, Kohner Properties. The Clayton, Mo.–based company has already been using Bank of America's remote deposit product for the past six months. Kohner, with $120 million in revenues, owns 50 apartment complexes in cities like Detroit, Tulsa, St. Louis, Indianapolis and Cleveland. Since late spring, it has had apartment managers at three of its properties depositing all of the rent checks electronically into an account at Bank of America, using a scanning device provided by the bank as part of its beta testing. "We love it. It's a beautiful thing," observes Jeff Burt, Kohner's CFO. Kohner realized savings because apartment managers scan checks as they come in rather than make less frequent trips to their local bank branches, Burt explains. While training people to use the equipment was easy, he warns that it does take an IT visit to the site to do the set-up, which adds to the upfront costs. Even with the cost, Kohner expects to switch all 50 properties eventually to remote deposit, Burt says. Banks servicing the largest companies face different challenges and have to offer many more flavors of the product. For instance, JPMorgan Chase is offering remote deposit as an extension of its ARC service: ARC-eligible items are converted to ACH transactions and ARC-ineligible items are printed as image replacement documents and deposited as paper checks that have been conveyed to the depository bank electronically instead of physically, reports Lisa Robins, senior vice president and business executive for check deposit services. But clients have the option of sending the whole file of check images to be processed as checks instead of split between ARC and check items, she adds.

DEMAND FROM THE TOP

For Citigroup's customers, the simplicity of plain remote deposit was the problem, not the solution. Although it was well ahead of the pack–starting to test a remote deposit product with broker-dealer Raymond James & Associates Inc. 15 months ago in anticipation of Check 21 authorization–the bank is finding that its large, sophisticated corporate customers would rather try to re-engineer broader processes instead of buying a simple, core service. Reports Jeff Oleske, Citi's director of global transaction services, these customers are encouraging Citi to develop systems that capture information about the deposits and feed it back to their accounting systems as an expansion of simple remote deposit. "We expected more people to sign up for the baseline product, but actually we're pleased that instead they're asking us to provide more functionality," he says.

Still, the potential is huge. Raymond James maintains 600 depository accounts for its branches, all of which could be closed when the company finishes converting its check deposits to imaging and electronic transmission, reports Ron Whitaker, assistant treasurer. Or the firm might keep two depository accounts for two legal entities, he explains. The process also means Raymond James gets its funds a day sooner, allowing it to reduce borrowing or add to investment income.

But the big benefits still lie ahead. Raymond James is waiting for IT resources and software improvements before it fully converts its check deposits. "The imaging currently captures the front and back of the check, but we have to insert client account numbers and check amounts," Whitaker explains. "We want to mesh the Citigroup software with our account software to make the data capture all automatic," he says.