Jumping on Board with RDC

Amy Donaghue

By: Tricia Longo, AAP, APRP, NCP, Manager, Audit Services

Given the effect COVID-19 has had on the world, and the requirements/preferences for social distancing, Remote Deposit Capture (RDC) has stood out as a great option for financial institutions. If you're considering jumping on board with RDC, here's some brief info to help get you started in the right direction.

Let’s start with the basics – what exactly is RDC? The Federal Financial Institutions Examination Council (FFIEC) defines RDC in its risk management guidance as “a deposit transaction delivery system, allowing a financial institution to receive digital information from deposit documents captured at remote locations.” These locations may be the financial institution’s branches, ATMs, physical business locations or mobile devices used by both consumers and businesses.

Financial institutions will have to decide how these items will be processed, either by electronic imaging or converting items into an ACH Entry. Appropriate agreements should be in place taking rules and regulations into consideration, including Check 21 Act, Regulation CC, Regulation J, applicable state laws, agreements and ACH Rules.

While RDC offers considerable benefits to financial institutions and their clients, the service has risks. When RDC is offered, the financial institution no longer have the opportunity to physically examine the item being deposited for counterfeit items or forged/missing endorsements, and security features may be irrelevant.

Consumer Use
For consumer applications of RDC, having a smartphone and adequate connectivity established, the user should be able to sit on their couch, capture an image of the check and send it off to their preferred financial institution. In this case, technology is already in the hands of the consumer at no cost to the financial institution. Software is usually built into the bank’s online banking platform.

Commercial or Retail Use
For commercial or retail merchants, RDC technology takes on a different risk perspective. In this situation, a merchant likely has a stack of checks from that day’s business to process. Transaction volumes are higher, and the dollar amounts are potentially higher as well. Hardware equipment is needed and usually provided by the financial institution.

Having a one size fits all risk mitigation strategy may not be the best policy when it comes to providing each of these service types. A financial institution should develop and implement risk measuring and monitoring systems for RDC activity. This includes endorsement requirements, setting deposit limits on the amount and/or number of items or duplicate item detection. It is also important to determine storage, retention and destruction requirements.

While you’re likely feeling the need to rush your organization’s release, conducting an RDC Risk Assessment prior to implementing the service is essential. Additionally, annually reviewing the risk of your RDC Program is highly recommended and considered a best business practice. And, you can leverage our expertise by having our Advisory Team conduct your RDC Risk Assessment virtually! To book your service and get on our calendar, email advisoryservices@epcor.org.

Going the DIY Route? Work Smarter, Not Harder!

Our Remote Deposit Capture Risk Assessment Workbook is designed to assist your institution in addressing remote deposit capture risk. The workbook content mirrors the FFIEC Remote Deposit Capture Risk Management Guidance and guides you in completing the step-by-step risk assessment. Take the guesswork out of your risk assessment and pick up the workbook today by clicking here.