Credit Unions Adopt Cost-Cutting Efficiencies Of Remote Deposit
Activities Double In One Year
DALLAS – The rapid-fire embrace of remote deposit services during 2007 has saved credit unions thousands of dollars. And as an increasing number of credit unions contemplate remote deposit services in 2008, millions of dollars hang in the balance.
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Credit unions are being squeezed by increasing expenses related to the inefficiencies of dealing with paper checks and the courier costs for sending those paper checks for processing. At the same time, credit unions are discovering how remote deposit services produce cost-saving efficiencies.
“This past year has seen an explosion of adoption,” said Jody Beck, senior vice president of operations for Southwest Corporate Federal Credit Union. “And the prediction for the new year is that it will be even busier.”
As one of the nation’s largest payment services providers for credit unions, Southwest Corporate’s statistics help illustrate a nation-wide trend. A year ago, in November 2006, 134 credit unions had signed up for Southwest Corporate’s remote deposit service. Those 134 credit unions represented 548 branches, where remote deposit services were deployed. Now, about a year later, the number of credit unions choosing Southwest Corporate’s remote deposit service program has grown to 331, representing 1,177 branches in 27 states.
Transactions jumped as well—going from 2.5 million in November, 2006 to well over 5 million just one year later.
“This product essentially doubled during the past year,” Beck said. “And I think it is important to put these numbers in context--this is a service that didn’t even exist three-to-four years ago.”
With Southwest Corporate’s remote deposit service, check scanners are installed at the branches and tellers scan checks in batches throughout the day. The remote deposit software provides instant verification of image quality, balances the transactions and sends check images to Southwest Corporate, Beck explained. Data completion is handled on Southwest Corporate’s end, and the credit union no longer spends time and money encoding checks.
Beck said imaged checks are then cleared the most expeditious and least-costly method, and finally, images are archived for online member access via Southwest Corporate’s Internet gateway.
“Capturing deposit transactions at the point of entry has other advantages,” Beck said. Real-time processing facilitates faster identification of fraudulent activity and customer deposit errors. Digital storage of transactions reduces the opportunity for checks to become lost during transport and eliminates the need for microfilming.
“We were microfilming and endorsing items, not to mention having to bundle and log the checks to get them ready for the run,” said Terri Mickelsen, vice president of internal operations at First Financial Credit Union in Albuquerque, NM. First Financial Credit Union deployed Southwest Corporate’s remote deposit service just a year ago. “We were still pulling our own checks two years ago, so I feel like we’ve come a long way in a short time, Mickelsen said, “I wish I had pulled the trigger long before I did.”
Although the number of credit unions adopting remote deposit services has been significant since the beginning of the 2007, there is no backlog or needless delays for credit unions wanting to implement the service. In fact, credit unions can determine the implementation timetable. “Credit unions make the decision when it is convenient for them, and Southwest Corporate can meet that timetable,” Beck said. That credit union-oriented scheduling is possible because of Southwest Corporate’s dedicated Remote Deposit Implementation Team—a feature not available from all remote deposit providers.
“Our dedicated implementation team is credit union experienced and after launching the service with well over 250 credit unions, they have tackled and solved every possible problem—including putting several Louisiana credit unions onto the services within days of Hurricane Katrina’s devastation in New Orleans,” Beck said.
Southwest Corporate has its own “testing lab” to check software compatibility and integration as credit unions prepare to bring remote services online.
Remote deposit efficiencies help reduce operational expenses, including expenses related to courier services needed to transport checks from branch locations.
“Aside from increases related to rising gasoline prices, the cost per item of dealing with paper checks is rising as more and more people are writing fewer and fewer checks,” Beck said.
A just-released Federal Reserve study officially proclaimed what many have already witnessed.
The Federal Reserve’s 2007 study of noncash payments revealed that in 2006 more than two-thirds of all U.S noncash payments were made electronically. From 2003 to 2006, the period covered by the study, all types of electronic payments grew while check payments decreased.
About 19 billion more electronic payments were made in 2006 than in 2003. In contrast, the number of checks paid fell by about 7 billion over the same period. Of the more than 90 billion noncash payments in 2006, about 63 billion were electronic and around 33 billion were checks.
The Fed study also noted: “One of the most significant changes of the past three years has been the increasing proportion of checks processed electronically. Such changes have improved the efficiency of the check clearing system.”
“The results of our study underscore the ongoing importance of check electronification and other innovations that improve the efficiency of the U.S. payments system,” said Richard Oliver, executive vice president of the Federal Reserve Bank of Atlanta and the Federal Reserve Banks’ product manager for retail payments.
Still, with some 33 billion checks written in the U.S. during 2006, check processing will remain an important member service for many years. “However, the way those checks will be processed will continue to change,” Beck said.
“In this case, change is good,” Beck said. “Lots of credit unions are going to save lots of money by processing checks electronically.”