Checking for the 21st Century
The NetBank-UPS talks began in early 2004, months before new federal banking legislation known as the Check Clearing for the 21st Century Act would take effect. The law was designed to greatly speed up the rate at which banks process checks.
No longer would banks have to use paper checks to record deposits. Instead, they could take electronic images of checks, transfer those images, record them and process them as legally as they had in the past dealt with paper.
In fact, in the next two years, teller machines will start popping up across America that take in checks, immediately convert them into images and ship them wherever they need to be processed and posted. The paper in the bottom of the bin will be superfluous, kept for a couple of weeks in case of dispute and then shredded.
Over four months, though, it became clear that UPS was not interested in putting teller machines in all of its stores. The equipment was expensive (about $25,000 each). And that would have to be borne by the franchisees.
Besides, who needed the machines when you had a store that had staff who already knew what to do with envelopes?
What NetBank and UPS worked out instead was a simple process for taking deposits. Any NetBank customer could walk into any UPS store, drop off a check and have it sent to the Alpharetta processing center. At no charge.
UPS, for its part, would drop any and all deposits picked up during the day at any of its stores into a single envelope for overnight delivery. As deposits multiplied, NetBank would save money over having each deposit sent in separately by business reply envelope.
And the time savings to customers like Erice would be dramatic. Deposits brought into a UPS store before noon on any given day would be in Alpharetta the next. The customer would see the amount posted no later than the next day.
A week of waiting would be pared to one or two daysalmost the same as with an automated teller machine around the corner. "It's funny how I am so far away from NetBank's facilities, yet can conduct my bank activities as if there were a branch locally," Erice notes.
From NetBank's view, the rollout has been successful. Begun in March, the UPS service now accounts for 30% of mailed-in deposits.
But the relationship with UPS and its stores can do more for NetBank than simply speeding up deposits for its own customers. What the service can do, potentially, is feed the transaction processing part of NetBank's business as well.
Purposely, the envelopes and the service that take in NetBank deposits were not named after NetBank. Rather, they were named for what they constituteQuickPost. As in quicker than the Postal Service.
In effect, any check destined for any bank could be put into a single QuickPost envelope at any UPS store. The checks wouldn't have to be from NetBank customers. All NetBank would have to do, in Alpharetta, is process those checks. Other financial institutions would become customers of NetBank. Which only makes the overnight envelopes cheaper, per item.
Say NetBank signs up fast-growing Commerce Bank, now operating mainly in New Jersey and other Northeastern states, as a customer. Commerce Bank immediately becomes a national bank. Chris Erice in Honolulu or Brian Murphy in Plano, Texas, can make overnight deposits by stopping in at a UPS store. Even if the deposits sent in are for Commerce Bank, not NetBank, they will be processed by NetBank in Georgia and routed to the right check clearinghouse.
The QuickPost envelope can be agnostic to the entire mix of deposits or payments that get put inside it. And the UPS store agent has a simple task: Put each deposit in the same envelopeand while the person is in the store, sell something else before the door swings back open.
"There is very little for the store owner to do," says Sean O'Shaughnessy, UPS' vice president of marketing and sales.
The main glitch in the startup phase: clerks who either didn't get training in how QuickPost would work, or who forgot what they had learned. But NetBank used a series of mystery shoppersa telephone-calling crewwho would dial up each store and ask about QuickPost. If the person who answered the phone knew what to say and how the service worked, no further action was taken. If an inquiry brought a blank or faulty response, the store manager would be contacted and a new training session set up.
Eventually, NetBank could sign up insurance companies, brokerage houses and other companies that want to serve customers nationally and want a convenient, low-cost means of pulling in checks every day. The company has two patents pending on its deposit-forwarding service. And expectations are high.
The potential revenue for NetBank from processing transactions that are dropped off at UPS stores "could be unlimited at this point," Kennedy says. "It's so new."
UPS also wants to find "creative combinations" of its retail outlets and its express delivery services. For instance, owners of Toshiba laptop computers can drop off their ailing machines at a UPS store for repairs. They'll be sent to UPS' distribution center in Louisville, Ky., inspected and fixed by UPS at a repair facility there and shipped back.