The advent of Remote Deposit Capture in 2004 has spawned a number of other useful applications for distributed capture – including RDC Lockbox. New life has been breathed into an old method for processing payments, making it much more efficient and cost-effective.
Lockbox banking has been around for nearly 70 years as a convenient method for customers to pay bills. Back in 1947, it was first introduced by the Radio Corporation of America (RCA), First National Bank of Chicago (now part of Chase Bank), and Bankers Trust Company with local drop boxes outside of retail establishments, where people could drop in payments on their bills.
Today the process is much more sophisticated, and is even becoming distributed, as it was in the beginning. This is happening with the use of RDC Lockbox which combines traditional lockbox processing with newer remote deposit capture methods and technologies to process those payments.
Though many payments today are made electronically through ACH bank account withdrawals or via credit card payments, some customers still prefer to write a check and send it into the central lockbox location. Lockbox was, for many years, a very large and profitable business for banks; however, with more and more customers moving toward electronic payments, it is not as lucrative or cost-effective for banks to be in the lockbox business these days. Many are outsourcing the process to third-party providers who can still achieve an efficiency of scale, while in other cases, the banks are promoting RDC lockbox applications.
Remote Deposit Capture (RDC), as many know, came on the scene in 2004 after the passage of the Check Clearing for the 21st Century Act (Check 21) passed in October of 2003 and became effective a year later. Check 21 allowed for the truncation of paper checks and the clearing of electronic replacements for those paper checks. The law was passed in response to the 9/11 terrorist event that grounded planes for more than a week — and as a side effect, brought check clearing in the U.S. to a halt, as most paper documents were stuck where they were and could not be returned to their originating banks. To prevent such an event in the future, congress passed the law to allow for the electronic processing of these items.
Today it is not unusual for businesses to capture and submit their checks for deposit on their own bank-provided check scanners. Float, the processing time between depositing and the clearing of the check, has disappeared in most cases, making cash flow and funds availability much more efficient for most businesses.
RDC has also come to the lockbox industry and is making the collection and processing of customer payments much more distributed and much more efficient. The idea of having customers walk into a local office to make payments used to be a highly inefficient and costly process for most businesses. The item would have to be handled and sent to the main lockbox by the local office, costing time and man-hours to process. The payment would also take longer to process, increasing the float and reducing the cash flow to the recipient company.
With RDC lockbox, rather than sending the physical paper for these “stranded” payments to the central lockbox, the items (check and payment coupon) are captured remotely and sent electronically to the main operations center. These items are either captured separately on check scanners and page scanners, or now can often be captured together on a combined check and page scanner.
RDC lockbox saves time and money, but also makes the overall operation more efficient. As banks move away from lockbox operations, third-party processors are moving item capture to their customers. And as with RDC for check deposits, customers are gaining quicker access to their funds and improving cash flow to the business. For more information about RDC Lockbox and Digital Check’s document and check scanners, contact us at 847-446-2285 or by email.