As if writing a paper check weren't tedious enough, it can generally take banks three to five business days to make funds available from a check deposit after clearing and settlement steps.
To address this longstanding pain point, Fiserv is planning to offer a platform that allows banks to make funds from check deposits available in seconds.
"Technology has improved over time and expectations of immediacy for everything comes into play here," said Victoria Dougherty, director of product management and Immediate Funds, for Fiserv.
The Brookfield, Wis.-based financial services and payments technology provider's Immediate Funds offering uses an algorithm to review a checking account's available funds, payment track record and other risk factors before enabling banks to offer immediate funds.
Despite the steady march of progress in digital and mobile payments, consumers are likely to continue writing paper checks regularly for five or more years, Fiserv says. Paper checks are also entrenched in small business operations.
Business owners "are really interested in getting funds credited immediately so they can get materials for a job they are contracted to do, or to pay their employees in a timely fashion,” Dougherty said.
It's a smart move for Fiserv, considering most bank customers would naturally expect immediate access to funds from a check deposit, said Marc Cochrane, an independent senior payments industry advisor.
"The banks move all of their money through the Federal Reserve and they borrow and lend money to each other overnight every day, so why not make a similar service available to the millions of households in the U.S.?" Cochrane said.
In what he categorizes as "basic blocking and tackling," Cochrane said Fiserv would monitor whether an account is open, what the average daily balance would be over a 30- to 60-day period, and size up other risk factors.
"Electronic funds should be made available right away from someone with a bank account to another person with a bank account," Cochrane added.
In the same manner, a growing number of person-to-person payment services such as PayPal's Venmo, or the larger banks' Early Warning/clearXchange, are making the movement of funds as straightforward as sending a text message.
The Immediate Funds offering seeks to bring a similar feel to the world of paper checks, as the service will review accounts and monitor digital traits such as Internet Protocol addresses and device location.
The service operates when a customer deposits a check with a bank teller, through a mobile device or at an ATM. In making the decision on whether to allow immediate access to funds, Fiserv also takes on the liability for fraud.
The service does not use any sensitive personal information such as Social Security numbers or credit card account numbers.
Fort Worth, Texas-based Valid Systems, a partner with Fiserv for this service, powers the various algorithms tuned to serve financial institution customers for use in Immediate Funds decision-making.
Valid Systems does not offer Immediate Funds as a solution to their clients. Fiserv plans to have its first bank clients offering Immediate Funds to customers in the third quarter of 2016.
On the surface, it may also appear as another piece of the overall faster payments system that many countries, including the U.S., continue to work toward. But Immediate Funds takes a different approach at this time, Fiserv's Dougherty said.
"With faster payments, we need full and perfect information for all banks on all aspects of payments, and that is not available now," Dougherty said. "Getting all of those firms together and getting all of that information to get payments immediately is a longer term prospect."
Instead, Immediate Funds calls for using data and algorithms to determine whether or not the institution can make proceeds available immediately on a specific check, Dougherty added.
It does work in the spirit of faster payments by making the decision for the banks, so those banks do not have to manage the technology to do so, Dougherty said.
"We can go ahead and make the decision, and provide coverage on the risk, should that check not end up being a good payment," she added.
Immediate Funds integrates with any third-party vendors a bank may currently use for daily demand deposit account operations. Fiserv offers a non-integrated setup for tellers with a Web application for guarantee requests, or an integrated version compatible with any teller system a bank uses for remote image capture.
Banks can integrate Immediate Funds Mobile into an existing mobile banking platform, as well as Immediate Funds ATM into the bank's account processing system to provide decisions on checks deposited through the ATM.
Banks pay Fiserv a fee for the service and have the option of charging customers for the service or providing Immediate Funds as a value-add to a checking account.
Recent Fiserv research of more than 1,500 consumers indicated many are interested in faster access to funds, with 40% saying they would pay for such access.
The study also stated that customers of all income levels and demographics wanted faster access to funds, Dougherty said.
"That was a bit of an 'aha' moment for me, seeing that even higher income brackets wanted this service and were willing to pay for it," Dougherty said.
Banks have also been asking for solutions to serve underserved clients, which typically favor check-cashing stores and prepaid cards to avoid overdrafts and other pitfalls of traditional banking.
"If they can't overdraw from their account, they can't get into financial trouble," Dougherty said.