In 2004, the Check 21 Act took effect, enabling businesses to deposit a check into a bank account from a remote location without physically having to deliver the actual check to the bank. This is done by digitally scanning an image of a check into a computer and then transmitting that image to a bank.
In 2012, some banks began to offer Remote Deposit Capture to customers through a smartphone application. The customer can use the phone's camera to capture an image of the front and back of the check. This image, along with other required information, is transmitted to the bank, where final validation occurs.
The Check 21 Act, also known as the Check Clearing for the 21st Century Act, was created as a way to keep America’s financial transactions operating smoothly in the case of a disruption or natural catastrophe that would otherwise halt long-distance transportation.
Like other technological advances made available through the Internet, Remote Deposit Capture is a valuable tool for saving time and money, as it is no longer necessary to send an employee or courier to the bank to deposit your checks. It also reduces human error since data does not have to be manually entered and re-entered and the risk of losing an actual check is virtually eliminated.
The only downside of RDC is that it eliminates ‘float’, the one to two day period between when someone writes a check and when the money actually comes out of their account. Without float, checks are a lot more like debit cards than traditional check payments.