A Reason To Forget Branchless Banks… Long Holds on Personal Checks

The purpose of a branchless bank is convenience; The aim of a mobile remote deposit capture, the ability to deposit a check with the snap of a smartphone, is supposed to double the ease of financial services.

Yet, many of these up-and-coming services that tout their advantages over traditional players are actually more inconvenient when it comes to personal checks.

PayPal, six business days to move funds using mobile RDC. American Express’ fee-less Bluebird account, the same. Green Dot’s recently launched, GoBank… 10 business days.

The immaturity of these alternative players is partly to blame. These companies simply don’t have enough transaction data to make smart decisions about who is, and isn’t, a trustworthy customer.

A Green Dot executive defended the policy of holding personal checks deposited via smartphones for up to 10 days as a necessary anti-fraud measure. The company added that it believes the policy represents only a minor inconvenience to most customers.

Of course, government and business checks, which carry near zero risk for the bank, are instantly deposited.

And, to be fair, most people seldom deposit personal checks. ACH transfers, direct deposit and payroll checks make up a majority of the deposits.

Still, the holds these companies are placing on personal checks cut against their biggest promise: ease of use.

For me, the only time I would say, ‘It’s About Time,’ as a GoBank customer is when the check my mother wrote me for my birthday clears.

Read my original draft of this story after the jump…

Hed: Customer Friendly? GoBank Puts 10-Day Hold on Mobile Deposits

Dek: Green Dot’s recently launched branchless GoBank account places a hold of up to 10 business days on the personal checks customers deposit using their smartphones — roughly double the time most banks take to make such funds available.

Tag: Technology

Companies mentioned: Green Dot, Celent, New Control

By Sean Sposito

Green Dot (GDOT) has billed its branchless GoBank account as customer friendly. But a closer look at the newly launched bank’s terms and conditions reveals it to be anything but convenient for people remotely depositing personal checks using their smartphones.

The process, which entails snapping a smartphone picture of a check in order to deposit it, takes up to 10 business days to complete.

[https://www.gobank.com/legal/]

Most other banks make funds from mobile remote deposit capture available within three to five business days, according to experts. For instance, GoBank competitor Simple (formerly BankSimple) usually places up to $200 in a customer’s account one business day after it is deposited — with the remainder of that check being released the following day.

(https://simple.com/blog/Simple/announcing-photo-check-deposit/)

GoBank, which launched in beta at the beginning of the year, was officially deployed to customers earlier this month. Already at least one person has complained about the company’s mobile RDC policy on its Facebook page.

“Perhaps the worst funds availability I’ve seen,” says Celent senior analyst Bob Meara, in an email, of GoBank’s mobile RDC. “A non-starter, in my humble opinion. Apparently GoBank imposes no eligibility requirements upon users as most banks do, so it established indefensible deposit holds to eliminate virtually any chance of deposit loss.”

The policy seems to cut against the reason why a customer would sign up with a branchless bank in the first place. Three days, Meara says, might be defensible, but in 10 — “well, a check could go around the world 50 times.”

In a common use case for GoBank’s remote check deposit, a college student might rely on personal checks from family members to fund tuition payments or rent. A 10-day wait is about nine days too long in such a situation.

To be fair, GoBank’s skinny fees (including a monthly fee of the customer’s own choosing) mean that the bank needs to minimize its risk. Green Dot is counting mostly on interchange  — the percentage merchants pay an issuing bank to process a transaction — to turn a profit.  

(http://www.americanbanker.com/issues/178_14/green-dot-adopts-radiohead-s-approach-to-fees-1056010-1.html)

There are other ways around the inconvenience of GoBank’s current mobile RDC system.

Customers can deposit funds into a GoBank account using a debit card from a different issuing bank to swipe funds in at Walmart. They can also remotely deposit a business or government check of less than $5,000 and get access to that cash within a business day.

John Morton, Green Dot’s chief risk officer, said GoBank’s youth is also a factor.

“This time frame as a general disclosure is fairly common in banking and is a smart risk control at this young stage of GoBank,” he said, in an emailed statement. “Our experience is that personal checks deposited to a new customer’s account via remote capture deposit are highly prone to fraud and abuse and so we have intentionally chosen to have a more conservative clearance policy on these types of checks.”

He also made the argument that few customers actually deposit personal checks.

In the meantime, most checks, Morton says, are payroll checks, government benefit checks and other types of business checks that receive near instant credit.

“We further expect our clearance policy to evolve over time as we get more customer data from which to draw better conclusions on this topic,” he says.

Practice, in this case, is more important than policy, says Mechanics Bank digital strategy head Bradley Leimer.

“Most checks run through RDC aren’t available immediately — risks [are] assessed by overall relationship, balances, sometimes other criteria,” he says. “But overall I bet GoBank’s RDC limits and timing are in line with Chase, USAA, BofA, etc. And that most checks will be deposited within one to three days depending on amount. [It’s] quicker for smaller” checks.

GoBank’s hold time, however, for regular checks just seems shady.

“It does seem to be counter to the thought process of everything else they do,” says Jim Marous, a senior vice president of corporate development at digital direct marketing agency New Control and author of the Bank Marketing Strategy blog, in an email. “It’s one of the things that run counter to the simplicity and ease of everything else.” 

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One thought on “A Reason To Forget Branchless Banks… Long Holds on Personal Checks

  1. I liked your post on your site today. I don’t know why banks hold checks for 10 days before cashing them. It is such a hassle when you have to go through this. I would just like to cash my check with out the hassle but I am not sure about using an online bank account.
    I find what you wrote very helpful. By the way, I like your motorcycle.

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