Today's topic: Image Replacement Documents (IRD).
September 11, 2001 was a major push in creating Check 21 which allowed financial institutions (FIs) to clear paper transactions in lieu of paper checks by taking an image of the front and back of those checks and creating an IRD, also known as a Substitute Check. This IRD served as a replacement for the paper check, sped up the clearing process, and allowed various payment systems to continue their operations.
In an IRD, the front of the check is captured as a digitized image as well as all components necessary to clear a paper check such as the Magnetic Ink Character Recognition (MICR) line, the amount of the check (if not already coded in the MICR line), the payor and their signature, the date, the drawee bank, and the payee. From the back of the check, the signature of the payee is also captured. This image replacement document results in a paper replica of the actual check.
Since FIs are constantly looking for ways to cut costs and remain competitive this has resulted in a push towards Remote Deposit Capture (RDC). If you don't have a commercial account with a financial institution but you do have a personal bank account, an RDC would be the equivalent of what most big banks now allow their account holders to do remotely; use their smart phones to capture a picture of the front and back of any check the account holder wants to deposit.
I recently did this for one of my bank accounts. I took a clear picture of the front of the check I want to deposit making sure the entire check was imaged in that one photo. Next, I endorsed the back of the check and then took a picture of the back making sure the entire check was also in that image. I uploaded both images to my bank via my mobile app and then I got a confirmation email shortly thereafter. This is a Remote Deposit Capture because I essentially captured an image of my paper check for deposit from a remote (not physically at the bank) location.
An RDC is similar to an IRD minus the paper product which equals less cost.
Capture the same pertinent information but without the paper = image payment clearing. According to this recent article from American Banker, Wells Fargo is piloting the imaging technology in select branches with tentative plans to roll out the imaging technology to all of its state locations in 2014.
What does this mean for commercial bank account holders? Quicker access to your funds since paper checks will now clear faster.
How does this tie into Account Analysis?
Many commercial account holders receive a service line item and charge for an Image Replacement Document (IRD) on their account analysis statement. The service description may vary across banks but the description of the service provided does not. The big banks have the tools in place to begin a push towards implementing imaging technology so, if all follow suit, we should expect the replacement of IRD service charges on the Account Analysis statement with RDC service charges.
Also, since it means less cost for the bank it's only natural to expect (and demand) a lesser charge for the account holders than using an IRD. However, the smaller banks won't have the capabilities to move with the imaging technology so you, the account holder, may send an image to your smaller FI for presentment but that smaller FI will instead produce an IRD and charge you for it.
Don't expect RDC services for quite some time if you have accounts with smaller FIs.
With change comes the importance of monitoring your Account Analysis statements to make sure you and/or your company are seeing the benefits of these changes and fairly so.
More info can be read about check processing here and about RDCs here.
Happy Analyzing!
No comments:
Post a Comment