Mobile Remote Deposit Risks, Rewards, and Deposits Presented by Kevin Olsen, AAP NCP SVP, Payments Education

Transcription

1 Mobile Remote Deposit Risks, Rewards, and Deposits 2017 Presented by Kevin Olsen, AAP NCP SVP, Payments Education 2017

2 Audio Handouts Questions

3 MOBILE REMOTE DEPOSIT RISKS, REWARDS, AND DEPOSITS 2017 Kevin Olsen, AAP, NCP SVP, Payments Education

4 About epayresources Not-for-profit Regional Payments Association Educational Programs & Payments Publications Member Benefits Voice & Representation in National Rule Making and Regulatory Process Payments Answerline Toll-Free Phone Support Discounts on Seminars, Publications, and Conferences 20 ACH Accredited Professionals (AAP) 4 National Check Payments Professionals (NCP) 3 Certified NCP Instructors 1 Certified Cash Manager Professional (CCM) 2 Certified Internal Auditor (CIA) 2 Certified Information Systems Auditors (CISA) 1 Certified Financial Services Auditor (CFSA) 2

5 Disclaimer This presentation and applicable materials are intended for general education purposes and nothing in this presentation should be considered to be legal, accounting or tax advice You should contact your own attorney, accountant or tax professional with any specific questions you might have related to this presentation that are of a legal, accounting or tax nature Image source: Thinkstock 3

6 Remote Deposit Products 4

7 Rapid Growth Mobile banking and payments will continually change, and the expectation among security and mobile experts is that the mobile channel will soon become consumers' primary financialservices platform Because the channel is convenient and can be customized, users will migrate from PC banking and payments to mobile And the more mobile users, the greater the security risk 5

8 What s the Difference? Corporate, Consumer, & Mobile Capture 6

9 Corporate, Consumer, & Mobile Capture Corporate Capture Customer Selection Solution Requirements Check MICR Scanner Operational Results High Volume/$$$ 7

10 Corporate, Consumer, & Mobile Capture Consumer Capture Customer Selection Solution Requirements TWAIN/WIA Scanner Operational Results Limited Adoption What to Expect Small & Micro Business Consumer 8

11 Corporate, Consumer, & Mobile Capture Mobile Capture Customer Selection Solution Requirements Smartphone Basis for Interest Cool factor, Convenience, Competition Operational Results Mass Adoption, Low Volume What to Expect Big, Small, & Micro Business Consumer 9

12 Does Mobile Equal Merchant? Mobile Remote Deposit Merchant Remote Deposit 10

13 Mobile For Businesses 11

14 Mobile RDC Trends Mobile RDC could eliminate the hardware scanner need/requirement For your lower volume customers 12

15 RDC RULES 2017 epayresources. All Rights Reserved 13

16 Regulation J CFR Title12, 210 Chapter 2 Collection of Checks and other Instruments by the Federal Reserve and funds transfer through Fedwire Reg J applies to financial institutions and banking at the Federal level 14

17 Legal Framework Regulation CC Implements the Expedited Funds Availability Act of 1987 Establishes availability schedules, endorsements standards and disclosure requirements Regulation CC, Subpart D Check Clearing Act for the 21st Century Act (Check 21) Substitute check legal equivalent of the original check 15

18 Uniform Commercial Code Article 3 Provides rules for paper-based transactions Defines negotiable items Identifies endorsement types Transfer and presentment warranties 16

19 Uniform Commercial Code Article 4 Covers check collection, payment, liabilities, timeframes, and responsibilities Late returns Stop Payments Special Circumstances Outlines relationship between Paying Bank and customer 17

20 Operating Circular 3 (OC3) Specific terms and conditions for handling items through the Federal Reserve Applies to the handling of all cash items accepted for forward collection and all returned checks accepted for return by the Federal Reserve Fed is a party to the sending and receiving of items under these rules Incorporates Federal and State regulations (Reg J, Reg CC, and UCC) regarding check processing Includes any additional Reserve Bank provisions for Fed exchanges 18

21 More Rules! NACHA rules ECCHO rules 19

22 More Rules Direct exchange agreements Direct sends between FIs Image exchange networks Endpoint exchange, Viewpoint etc. 20

23 ANSI Standards X Specifications for Electronic Exchange of Check and Image Data Universal Companion Document Industry Adoption of X (ECCHO) X (Formerly DSTU X9.90) Specifications for an Image Replacement Document (IRD) 21

24 FFIEC RDC Risk Management Guidance Released January 14, 2009 RDC risk management process in an electronic environment Focusing on RDC deployed at a customer location Principles of RDC risk management discussed are applicable to: FI s Internal deployment ATM, Branch, Cash Vault Other forms of electronic deposit delivery systems (e.g., mobile banking consumer and ACH check conversions) Retail Payment Systems Booklet Release February 10,

25 2011 FFIEC Guidance on Authentication Thus, for those RDC systems using the Internet as a communication medium, management should implement multifactor authentication, layered security, or other controls reasonably calculated to mitigate risks. 23

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27 What s at Risk Reduction in customer satisfaction and loyalty Loss of revenue 25

28 What s at Risk Damage to the financial institution s brand as a provider of quality services 26

29 Training 27

30 Duplicate Presentment 28

31 Duplicate Presentment Financial Institution A sends items in an Image Cash Letter (ICL) to the Paying Bank on Monday, Financial Institution B sends the same items in an ICL to the Paying Bank on Tuesday What recourse does the Paying Bank have and to which bank? 29

32 Duplicate Presentment When a warranty against duplicate presentment is violated, the Paying Bank could pursue a warranty claim against either Financial Institution A or Financial Institution B Regulation J (Sections and 210.6) Reg CC (Section (a)(2)) Section XIX(L) of the ECCHO rules for check images subject to the ECCHO Rules 30

33 Funds Availability 31

34 Funds Availability Typically funds are made available according to the same schedule as they would branch deposits Many RDC systems allow the financial institution to set funds availability by account and dollar amount so that holds can be placed when limits/thresholds are exceeded Some financial institutions have chosen to give immediate credit for consumer capture deposits 32

35 Fees 33

36 Fee Structures Funds available immediately 1-5% of the amount of the check Funds available for same day/processing tonight (subject to cutoff times) $ $5.00 per check Standard mobile availability (1-6)days $.00 - $1.00 Free We pay you! 34

37 Deposit Limits 35

38 Deposit Limits Know Your Customer! Limits on who can use it i.e., length of account ownership, credit history, account relationship Options Require a customer relationship of X months, and along with a deposit account Require the customer must have at least one of the bank s credit, insurance, or investment products 36

39 Indorsements 37

40 Endorsements BLANK RESTRICTIVE SPECIAL ANOMALOUS John Q. Doe For Deposit Only John Q. Doe Pay to the Order of Harry Johnson John Q. Doe Jane Doe 38

41 Restrictive Endorsement For Deposit Only to ABC Financial RD Service Only, Account Number, & Signature Endorsement, which limits further negotiability of a negotiable instrument ENDORSE HERE For Deposit Only to ABC Financial RD Service Only John Doe DO NOT WRITE,STAMP OR SIGN BELOW THIS LINE 39

42 Item Destruction 40

43 Item Destruction When and how is the item destroyed? Merchant Method and timeliness in the agreement Mobile How? When? Holder In Due Course (HIDC) 41

44 P R O O F I N G 42

45 Proofing Before Check 21 all items were reviewed by the financial institution before being presented Teller Back office After Check 21 there is no physical item to review 43

46 Proofing Are you reviewing files? All items? Certain dollar amounts? Any risk rating assigned? Are you preventing losses? 44

47 Security 45

48 Consumers Still Do Not Treat Their Smartphones Like Computers 46

49 Role of consumers Financial institutions must develop strategies to educate their customers and members about actively managing their own mobile-device security 47

50 Where s the Security Browser/Application memory purged? Encryption standard 48

51 Where s the Security Multi-factor authentication 49

52 Vendor Management 50

53 Vendor Management Are you responsible for your third parties use of a third party? Patent trolls 51

54 RISK CONTROLS FOR MOBILE

55 Applying Lessons from Online 53

56 FFIEC Guidance Supplemental guidance released June 28, 2011 emphasizes: Need for layered security Periodic risk assessments and adjustments In wholesale banking, requirement for layered security for both login and electronic transaction initiation Highlights value of behavior analytics in preventing fraud Requirement of enhanced controls for users with admin rights Simple device authentication and challenge questions are not sufficient Mobile channel not exempt Regulators began assessing FIs using new guidance in January

57 Mobile Banking Security Tips Use the keypad lock or phone lock function on your mobile device when it is not in use These functions password-protect your device to make it more difficult for someone else to view your information Be sure to store your device in a secure location 55

58 Mobile Banking Security Tips Never disclose via text message, phone call, or your personal or financial information, including account numbers, passwords, Social Security number, or birth date 56

59 Mobile Banking Security Tips Avoid storing your banking password or other sensitive information on your smartphone where it could be discovered if your phone is stolen Keep your mobile operating system up to date to ensure the highest level of protection Before downloading an update to your mobile device be sure to go to the company s website to confirm the update is legitimate 57

60 Mobile Banking Security Tips Download mobile apps from reputable sources only to ensure the safety of your personal and account information Download the most recent versions of apps and keep them update 58

61 Mobile Banking Security Tips Be cautious when using public hotspots Consider your Wi-Fi and Bluetooth connection settings, even at a trusted retailer, as fraudsters can spoof the name of reputable hotspots TrustMe.com 59

62 Mobile Banking Security Tips For your security, sign off when you finish using a banking app rather than just closing it If you have suspicions about the authenticity of a mobile banking app, access your account through our mobile banking site, or contact the financial institution directly 60

63 Anticipating Risk As more mobile services hit the market, banks and credit unions must balance innovation with fraud protection and compliance 61

64 Anticipating Risk More threats will emerge as adoption grows Anticipating new risks will be paramount One fact is clear Mobile is here! 62

65 Continuing Education Credits AAP Continuing Education Credits Session title: Mobile Remote Deposit Risks, Rewards, and Deposits 2017 Session is worth 1.2 AAP/NCP CE (continuing education) credits Topic area: Comparative Payment Systems Date conducted: 5/2/17 Conducted by epayresources Some of our sessions may also be eligible for other industry certification renewal credits Check with your certifying organization for eligibility requirements 63

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67 Kevin Olsen, AAP, NCP SVP, Payments Education ext

68 General Information Education Dept. 66

69 epayadvisors provides payments-related risk management, compliance, and consulting services to financial institutions and businesses throughout the U.S. Our services include: Expanded Scope ACH Audit for financial institutions ACH Audit for Third-Party Senders & Third-Party Service Providers ACH Risk Assessment Remote Deposit Capture Audit Remote Deposit Capture Risk Assessment Wire Transfer Audit Wire Transfer Risk Assessment Payments Consulting For a free quote visit us at: 67

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72 Kevin Olsen SVP, Payments Education (800) Upcoming epayresources events with CBANC Education: RDC Bootcamp Same Day ACH for Board and Sr Mgmt June and 6/7/8 at 11am CT/12pm ET July 17 at 1pm CT/2pm ET