Pew: Smartphone Deposits Differ by Where and How You Bank

Washington—The Pew Charitable Trusts released a report today examining mobile remote deposit capture (mRDC), a key feature of mobile banking that is gaining popularity among banks, prepaid card companies, and consumers. Pew’s analysis identified key mRDC terms and conditions and found that many are poorly disclosed or generally unavailable to prospective customers.

First introduced in 2009, mRDC allows individuals to take smartphone or tablet photos of endorsed paper checks and deposit them through an app from their bank or prepaid card company. According to survey data from the Federal Reserve, adoption of mRDC is relatively small but growing: It increased from just 2 percent of consumers in December 2011 to 11 percent in December 2013. Although mRDC is a relatively new technology, its use is expanding; it can provide greater user convenience and lower the cost of check processing for financial institutions.

The Pew report, Terms and Conditions of Mobile Remote Deposit Capture: The Disclosure Practices of Banks and Prepaid Card Companies, examines how financial institutions present mRDC products to their prospective customers.

“As smartphones become a more popular banking tool, transparency will be vital to the understanding and use of these applications,” said Susan Weinstock, who directs Pew’s consumer banking project. “Yet Pew’s review shows that many banks and prepaid card companies offering mRDC fail to market the product in a way prospective customers can clearly comprehend. If people are confused, they may not recognize all the potential functionality and benefits available, such as making deposits via smartphone as a lower-cost alternative to check-cashing stores or reloadable prepaid cards.”

For the report, Pew examined mRDC availability and policies at 50 banks and 51 prepaid card companies, identifying 10 key terms and conditions that prospective customers are likely to consider when deciding whether to use the technology. These include cost, the time before deposited funds become available, and eligibility requirements. Pew’s analysis found that:

• Banks are more likely than prepaid card companies to offer mRDC, although several large banks do not yet do so.
• Terms and conditions of mRDC are typically available to prospective customers online rather than through the mobile banking app that they would use to make mRDC deposits.
• Large majorities of banks and prepaid card companies disclose some terms and conditions for using mRDC, including the costs, enrollment requirements, deposit limits, and posting policies; however, only one institution discloses all of them.
• Most banks disclose that mRDC is free to the consumer, though some charge for this service. Conversely, most prepaid card companies assess a fee with disclosed costs of as much as 4 percent of a deposit.
• Among the prepaid card companies studied, all disclose funds-availability policies and most give choices for availability, including an immediate option for a fee. By contrast, almost half of the banks examined do not disclose these terms, but of those that do, most make funds available between one and two days after posting the deposit.
• Most banks do not disclose whether mRDC deposits follow funds-availability rules that usually apply to checking accounts; of those that do, all say that these rules do not apply.
• Most banks and prepaid card companies alike inadequately disclose whether they provide alerts on the status of mRDC deposits, including those that are rejected.

The better informed customers are about their companies’ policies, the better they will be at managing their account balances and avoiding unnecessary fees. Providing greater transparency could be a powerful tool for providers to help build confidence in mobile banking.

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The Pew Charitable Trusts is driven by the power of knowledge to solve today’s most challenging problems. Learn more at www.pewtrusts.org