Adding another twist to the concept of online banking, PayPal has added an iPhone app that allows users to photograph their checks and deposit the funds into their PayPal account, according to an Associated Press report.
Within the first 36 hours of launching the feature this week, PayPal reportedly transacted $100,000 in checks, the report notes. Once the checks clear, customers can move the funds to their bank accounts. PayPal, however, advises customers to hold onto their physical checks for 15 days, as a back up in case they don't clear.
The move by PayPal is part of a growing trend to reduce\ the need to visit ATMs or bank branches to deposit checks. Customers now have an increasing list of options, from check scanners they can use in their homes to relying on their computers and scanners. Chase Bank has been heavily advertising its similar service allowing smartphone users to photograph and deposit checks, and USAA and State Farm Bank have apps for that as well.
Since the passage of the Check Clearing for the 21st Century Act in 2003, which gives banks the ability to exchange checks via electronic images, institutions have been looking for ways to use that flexibility to cut costs. And having consumers and businesses take it upon themselves to electronically transfer funds into their accounts without the need for manually processing checks is all the better.
Javelin Strategy & Research estimates the banking industry can save $8.3 billion in operating costs by pushing customers toward online banking and bill payment. Banks, aware of the money they could save, have been using a number of incentives over the years, from free checking to a variety of promotions, to motivate their customers to use Web-based services.
Apparently consumers are responding: 92% of survey respondents said they conducted an online banking transaction in the last month, according to an RSA 2010 Global Online Consumer Security Survey of 4,500 adults across the globe released in January.
But the survey also found that security concerns loom large when it comes to such transactions: 86% of respondents said they were concerned that personal information would be pilfered from the online banking site.
PayPal, owned by eBay (EBAY) is well aware of such issues. During the summer, the online payment processor was embroiled in a security breach in which some people using their PayPal accounts via iTunes found their accounts drained. With PayPal rolling out its iPhone check scanning app, one can only hope that any security holes have been buttoned up.
Socially Responsible Investing
Invest in companies with a conscience.View Course »