Remote Deposit Capture Making Inroads in the UK Market
Remote deposit capture capabilities were the topic for a recent Future in Focus discussion forum, hosted by Fiserv. This U.K. event was the first in a series of sessions designed to address top-of-mind topics in the international financial services market.
Technology has revolutionised core banking services over the last few years and we have seen consumer interactions with banks migrate from branches, to the telephone and PC, most recently morphing into mobile banking services. So it’s probably no surprise that after 350 years of faithful work in support of the U.K.'s economy, and following several minor facelifts, it’s finally time for the 'analogue' cheque to take its place in the digital payments ecosystem.
Since its heyday in the last century, U.K. cheque usage has been in gradual decline, but while reports show that volumes fell 12 percent from 2012, in 2013, the U.K.’s banked community wrote over 1.3 million cheques every working day, moving over £500 billion round our economy during the course of the year. This decline in volume does have some side effects; unit costs per cheque processed have steadily risen, resulting in repeated calls for the death of our last flexible friend. Unsurprisingly, the writers of those 1.3 million daily promises to pay have kept the cheque away from the final, digital solution.
We know that paper cheques are expensive to process, but their status as the last 'anywhere, anytime' payment method means they fill a role that would otherwise be vacant. Recognising this, and after a failed assassination attempt by the Payments Council, HM Government included a draft regulation in the Small Business, Enterprise and Employment Bill that will enable cheques to be digitised and transmitted instantly. Digitisation will be achieved using mobile phone cameras and apps, or scanners located in bank branches, ATMs, corporates or SME offices. Whilst legislation is due to be enacted in 2015, we have already seen forward-thinking banks beginning closed loop or 'On Us' pilots, as slower responders ponder their options.
Whilst new to the U.K., mobile ATM and scanner-based remote deposit capture (RDC) technology has been a fact of life in the U.S. for many years. Introduced as an expedient to remove the need to ship paper cheques around the U.S., 'Check 21' legislation (which created a cheque replacement document) has meant that digitised cheques are not only viable but are holding their own.
In a new cheque clearing model, using Faster Payments in the U.K. and intelligent mobile banking services, credit is transferred between trusted parties instantly, payers can be advised when cheques are presented for payment, and where a cheque bounces, payer and payee would have the option to communicate and fix the problem quickly, minimising rework and exception processing. Banks are perfectly able to create this new order; they just need to leverage U.S. cheque processing experience, with their debit/credit card practices and blend with established Faster Payments tool. Applied with excellent mobile user interfaces, the possibilities are endless.
Having an Edge
At a recent Fiserv discussion forum, the appetite for change was clear. One attendee representing a U.S. bank with U.K. branches made it clear that multinational clients, who had got used to RDC in the U.S., were incredulous that the U.K. did not employ the same technology. U.K.-only banks were keen to move forwards in order to realise the savings and service improvements as quickly as possible to maximise return on investment. Well, it would seem the times they are a changing, and I believe this change is closer than we think. Time will tell.