Remote Deposit Capture and Third Party Checks

Third-party checks are a $300 billion business, according to 2006 data from Boston based researcher Aite Group . The majority of third party checks are payroll checks. About half the checks are cashed at banks. The other half are cashed at grocers, convenience stores, check cashers, and other retail locations.

NACHA, the governing body for the ACH Network does not permit third party checks to be cleared and settled through the ACH network. But the checks can be processed electronically via remote deposit capture, using technology which complies with Check 21 legislation. Check 21 allows images of third party checks to be cleared and settled through the Federal Reserve , completely bypassing the ACH network.

Third party checks represent a good niche market for Check 21 remote deposit capture. But, like ACH processing, remote deposit capture is a volume driven business. With profits of only a few cents per transaction, it takes a lot of transactions to make any money.

Although remote deposit capture itself is not hugely profitable, banks are using the service as an incentive to capture more direct deposit account business. Many banks will provide free scanners or lease the scanners for a few dollars per month. For the banks, the profits come cross-selling additional products to commercial customers as well as from money generated from the float of the new deposits.