The latest craze to hit Canada’s banks is a new take on an old payment system: personal cheques.
Despite the surge in electronic money transfers and the rapid growth of credit-card transactions, many Canadians still use cheques. The Canadian Payments Association recently estimated that almost four million are written each business day.
For the recipients, that has typically meant a trek to an ABM or a bank branch to turn the paper IOU into cash or a deposit. But now financial institutions such as ING Bank Canada and Canadian Imperial Bank of Commerce offer tools that allow cheques to be deposited from the comfort of a home or office.
By simply using their smartphone to snap two pictures of the cheque – the front and the back – a bank client can instantaneously deposit the funds and watch as the money magically appears in their account.
Many U.S. banks have long offered similar services, but Canadian banks have been slow to adopt the technology. Those that are taking the step hope it will distinguish them in the highly competitive “retail” market for consumer banking, where lenders still make the majority of their profits.
“It’s very important that we differentiate ourselves from our competitors,” said ING chief executive officer Peter Aceto. (ING is now a division of Bank of Nova Scotia, which bought the Canadian arm of ING from its parent company for $1.9-billion in 2012.) “We want to look different, we want to behave differently.”
Standing out in the retail market is important for ING because it doesn’t lean on other divisions, such as capital markets, to diversify its profits.
The company has already seen ample demand for the service, which it launched by teaming up with NCR Corp., the U.S. company that developed the technology. Since announcing the service in June, the bank has executed more than 100,000 remote cheque deposits, or between 6,000 and 7,000 a week.
The banks that have adopted the technology stress that the service makes life easier for their customers. CIBC noted that the initiative was one of the top requests from their clients, and the bank’s own executives could understand why from personal experience.
“When we get cheques, they sit in either my husband's wallet or my purse until one of us makes it to a banking machine,” said Shelley Swanlund, CIBC’s vice-president of business banking.
At the moment, remote deposits can only benefit certain clients, because businesses that process myriad cheques don’t have the time to snap pictures of each. But Ms. Swanlund noted that CIBC is working on a digital processing tool that will make it easier for the bank’s business customers to process cheques more quickly.
The innovations ultimately save the banks money, too. Mr. Aceto noted that cheques are one of the most expensive ways to process deposits. Although many of the processing steps have been automated over the years, cheques deposited in ABMs still need to be picked up and verified. Smartphones can now cut out many of the intermediary steps.
Still, even the banks offering these services realize that cheques are becoming a thing of the past. The Government of Canada is pushing direct deposits for tax refunds, and many workplaces stopped issuing physical cheques long ago.
In another sign of the times, Davis + Henderson Corp. of Toronto, which was originally known as a cheque-printing company, has diversified its business model over the past few years, going so far as to strike a $1.2-billion (U.S.) acquisition of a banking software provider this past summer.
But it will take time for cheques to be entirely phased out. Britain originally set a deadline to remove physical cheques from its payment system later this decade, and has encountered an uproar from charities and small businesses.