Deposit checks by iPhone

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The internet has taken a lot of the paperwork out of banking, but there is no avoiding paper when someone gives you a check. Now one bank wants to let customers deposit checks immediately – through their phones.

USAA, a privately held bank and insurance company, plans to update its iPhone application this week to introduce the check deposit feature, which requires a customer to photograph both sides of the check with the phone’s camera – reports the NY Times.

‘We’re essentially taking an image of the check, and once you hit the send button, that image is going into our deposit-taking system as any other check would,’ says Wayne Peacock, a USAA executive vice president.

Customers will not have to mail the check to the bank later; the deposit will be handled entirely electronically, and the bank suggests voiding the check and filing or discarding it. But to reduce the potential for fraud, only customers who are eligible for credit and have some type of insurance through USAA will be permitted to use the deposit feature. Mr. Peacock said that about 60% of the bank’s customers qualify.

USAA may seem like an unlikely innovator in mobile banking. It ranks in size just below the top 20 banks in the US, and serves mostly military personnel, though many of its products are available to anyone.

But with just one branch, in San Antonio, and customers deployed all over the world, the company has been aggressively developing an anytime, anywhere banking strategy. Three years ago, it introduced the option of depositing a check from home using a scanner. That laid the groundwork for the phone deposit feature, which USAA plans to offer on other phones this year.

‘Mobile is going to be a bigger part of how people do commerce and how they interact with their financial institutions,’ says Peacock. ‘The great value that we see is the time savings.’

About a million of USAA’s 7.2 million customers use their phones to access their accounts – either via text message, a mobile browser or an iPhone application introduced in May. The deposit feature, which USAA previewed in an online video in June, puts the bank in the vanguard of the effort to turn phones into portable branches.

‘USAA has been pretty progressive with this,’ comments Nick Holland, senior analyst, Aite Group. The most popular banking tasks done on phones are reviewing account balances, transferring money, making payments and finding ATM’s, analysts say. But in general, mobile banking has been slow to catch on. Holland says tighter budgets have forced banks to focus on using technology in ways that cut costs or generate revenue, rather than simply creating buzz.

‘If banks can get people to stop calling call centres for mundane inquiries and instead send a text message,’ Holland says, ‘that saves a bank about $14 for every one of those inquiries.’ Holland predicts that other banks would follow USAA and offer some type of mobile deposit capability, especially deposit options aimed at small-business customers who may be willing to pay for the convenience.

A study released recently by comScore, a digital audience measurement company, found that more than 15 million people in the US used mobile banking each month, a number that is expected to grow as networks become faster and more people migrate to smartphones.

While comScore found that just three percent of mobile banking customers use Apple devices, the iPhone has paved the way for applications that let customers accomplish tasks more efficiently than with a phone’s web browser. For instance, Bank of America, which has an iPhone app, has more than 3 million mobile banking customers, and 43% of them bank with an iPhone or iPod touch, says Tara Burke, a company spokeswoman.

A phone is also always at hand, so it is potentially a more convenient than a computer. In fact, comScore found that people most often use mobile banking services at home.

We’ve all seen the ads showing people banking from a beach in the Caribbean; the reality is much more mundane than that.