Data Mining Checks - As part of Remote Deposit Capture

Now that checks are being “digitized” there are so many possibilities in the market not the least of which is data mining. Many companies and non profits that take checks today are keying in the check writer information in order to preserve their data base of “customers” or “donors”. Keying in information is expensive and error prone and many companies can not afford it. With new technology such as ACHeck21 that is no longer the case. Technology can electronically capture and parse the information – saving literally millions of dollars in some cases. By electronically capturing the information on the checks they receive a business or non profit can not only create a data base to service their customers but demographic data can be mined. For example – how many people from a certain Zip Code donated over $500 to your charity or political party? OR, who purchased a pizza in a certain franchise during a special event and what zip code did they originate from? Having this information can also help in other ways. For example companies that ship a product can rest a little easier if the ship to address and the address on the check match.

There are some challenges to be met but the benefits can far outweigh the challenges.

Technical Issues:

The technology to capture the routing/account number/check number and amount is old school and readily available. However, ACHeck21 offers emerging technology that will also capture the check writers name, address, city, state, zip, and phone and parse it into a data base. The data base can then be used for research, marketing and verification. It is this emerging technology that holds a lot of promise for many businesses.

Data mining should be part of an integrated check imaging and processing solution that includes:
Electronic Deposit (offering both ACH and Check21 file formats)
A/R update
Searchable Archival of images (searchable by all parameters captured during imaging including check writer information)
Distributed Capture (including eCheck and Tel)
Remittance processing (including virtual stubs)
Return check management (including re-presentment or export of files to third party collection agencies)
Extensive on line reporting allowing hierarchical organization on a need to know basis and easy reconciliation with bank deposits
Highly secure
Verification (optional)
Flexible

Legal Issues:
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If not properly used and protected capturing non public information from a personal check may be illegal under various Federal laws such as the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act[1]. A casual reading of the Act would indicate the Act applies to Banks and their “consumers”. However, it also applies to non banking activities which are listed out on the Federal Trade Commissions web site. In addition your bank may require a “Privacy Policy” in certain cases. The objective of the law as I read it is not to keep a merchant from knowing his customers’ information but to keep the merchant from selling or giving that information to non related third parties – who will then use (abuse) the information to enrich themselves at the consumer’s expense.

Not all businesses are required to be compliant with Federal laws governing privacy. However, even if your business is not regulated by law, the consumer and some business owners have come to expect that their non public information will be held in the strictest of confidence, that they will be notified of any breach of this rule and that at some point in the relationship they have or will be furnished with a privacy policy. So it behooves anyone handling checks to have a way to secure non public information whether in electronic form or physical form. To do otherwise may expose a business to risk of reputation, litigation and loss of business.






[1] The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, was enacted by Congress November 12, 1999. The Act allowed commercial and investment banks to consolidate. However, among other things the Act provided a Financial Privacy Rule which requires financial institutions to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter. The privacy notice must explain the information collected about the consumer, where that information is shared, how that information is used, and how that information is protected. The notice must also identify the consumer’s right to opt-out of the information being shared with unaffiliated parties per the Fair Credit Reporting Act. In summary, the financial privacy rule provides for a privacy policy agreement between the company and the consumer pertaining to the protection of the consumer’s personal nonpublic information. There are exceptions to the opt out provisions. The client cannot opt-out of: information shared with those providing priority service to the financial institution; marketing of products or services for the financial institution; or, when the information is deemed legally required.