Will in-store conversion threaten checking account?
By Laura Bruce • Bankrate.com

Don't let the terms "remote deposit capture" and "back-office conversion" lull you to sleep. These payment-processing services leave the fate of your paper check in the hands of a business instead of a bank.

That's not necessarily a bad thing, by any means, but if you aren't already taking time to reconcile your checkbook with your monthly statement, you'd better start.

Essentially, both services let the check's paper trail end with the business or retailer. The check is scanned and converted to an electronic payment, which is sent to the bank through the Internet or a dedicated line and deposited in the store's account. The store keeps your paper check on hand for a certain amount of time before destroying it.

There's an obvious convenience factor, especially for stores and small businesses, because they no longer physically have to take the checks to the bank for deposit. They can deposit checks from the convenience of their back office any time of day.

What happens to your check?
But this raises questions that could be important to consumers: How is the check stored before it's destroyed? Who has access to the check while it's stored? Could the check be deposited twice -- once electronically and then in-person at a bank? What constitutes destruction of a check? Would some stores just toss them in the trash?

There's no indication that fraud and identity theft will increase because businesses are keeping your checks instead of sending them on to the bank. To be sure, many larger businesses already stop your check in its tracks and convert it to an image or data. Some say that as the reach of these services expands, it creates more opportunities for problems.  

How safe is your account information?
Brian Dunne, vice president at SQN Banking Systems, a provider of check fraud-detection software, says the fiduciary role banks have long played in making sure a check is good and in safeguarding identity and account information is now being put on the stores' shoulders.

"In the previous payments environment, when you wrote a check it went to the bank and the bank was the custodian of the document. While the bank still has a fiduciary role, they're outsourcing some of their responsibilities to their customer -- the merchant -- and they need to make sure that their agreements are in place and that they know that customer. Remote deposit capture becomes a panacea, and they're offering it to smaller and smaller institutions and they have less control over those types of environments."

Mark Smith, who supervises state bank examiners at Washington State Department of Financial Institutions, calls it new ground. "You just don't know where the bank ends and the merchant begins. We try to caution (banks) that regardless of where you think you stand legally, a lot of times banks are deep pockets, and if there's identity theft or something happens as a result of this, the bank could face liability and reputation risk, if nothing else."