Electronic payments and remote deposits: Will banks move past products to solutions?

The shift to electronic payments throughout the US economy is driven by an irresistible logic of cost savings and convenience for customers and financial institutions, but, in some ways, the changeover from paper to digital has been piecemeal and slow. Adoption of electronic payments has advanced the most through consumer use of credit and debit cards, as well as banks' and businesses' provision of technology to support the cards. Although cheque writing has declined in the past decade, cheques remain the most common form of non-cash payment. Businesses still handle billions of those cheques manually and deposit them through traditional processes, which involve carrying stacks of paper to a bank. Since the Check Clearing for the 21st Century Act (Check 21) took effect in 2004, electronic cheque-handling systems have broached the mainstream of business. Users range from giant retail chains to small independent companies, and techniques such as remote deposit capture have gained acceptance. But studies show that adoption has a long way to go. The latest Federal Reserve survey of depository institutions found 57 per cent of inter-bank cheques in 2007 were presented to the paying bank in the form of original paper cheques, and 15 per cent more were presented as substitute cheques or electronic with paper to follow. Fewer than one-third were converted to electronic form and deposited remotely — a lost opportunity for businesses and their banks. This paper argues that financial institutions must integrate tools such as remote deposit into comprehensive solutions for businesses, driven by the customers' desire to drive efficiency and strengthen security in treasury management. The increasing commitment of banks to building customer relationships on a digital platform will accelerate a shift from products to solutions — and transform bankers from selling services to serving as true partners.