Remember how cool it was when ATMs came on the scene and you didn’t have to wait in long lines at the bank anymore? Were you delighted when some of those ATMs could then scan your check, allowing you to make deposits from your car after-hours? If so, you’re going to love a new PayPal feature, especially if you’re a freelancer who receives a lot of pay checks.
With the snap of a photo, small business owners can now deposit their pay checks with iPhones, thanks to a new PayPal Mobile’s Mobile Check Capture launched last Wednesday. PayPal joins the ranks of Chase and USAA by offering this feature, which will help move the $500 million PayPal expects to change hands via mobile this year.
Similarly, credit cards provide mobile phone-assisted transactions, allowing you to accept credit card payments through the phone, making smart phones truly virtual wallets for freelancers. With only a phone and a plug-in device, if applicable, vendors can take credit card payments and process checks with ease, in their pajamas from bed if they wanted to. No more lines at rush hour. No more scheduling your day around bank hours.
By taking pictures of the front and back of the check and initiating the electronic transaction, freelancers are increasing their independence from banks, and the ramifications are yet to be seen. With the growing amount of small business owners that could take advantage of this kind of service, the response could be significant.
Ecommerce Journal points out that PayPal is the only non-traditional entity with this technology, initially inspired by the crashing of U.S. banking after 9/11 when everybody tried to withdraw money at once. The journal adds that September 11 prompted the U.S. government to bolster electronic check technology. Called “Check 21,” short for “Check Clearing for the 21st Century,” the law passed in 2004 to allow banks to clear more checks electronically.
What Does it All Mean?
Laura Chambers, senior director of PayPal Mobile, lauds the app as contribution to the phasing out of paper checks.
“We all agree that the future of money is digital, so it’s hard to believe that there are people and businesses in the U.S. still using an analog technology that’s 400 years old,” Chambers said.
Andy Schmidt, a research director of TowerGroup’s global payments service, tells American Banker that such technology actually could slow the extinction of paper checks, but adds that making people more comfortable with mobile finance will help along the phase-out.
Joshua Schnell of Macgasm expresses security concerns for this technology, not to mention needing customer service if there’s a kink in the chain.
“It doesn’t get much more convenient than that, but am I the only one who’s having a difficult time with the potential security concerns? I guess it’s no different than forging a check and depositing it at an ATM, but man, I have a huge fear of someone stealing my mail and depositing my checks to their PayPal account,” he said.
How Do I Use It?
1. Log into your PayPal account and select the “Tools” button at the bottom of the first screen.
2. Scroll down until you see “Add Money From Checks.”Approve user’s agreement, and then you will see a screen that tells you the check will take 7 days to clear. Hit “Continue.”
3. Follow the prompts to photograph the front and back of the check. Wait 15 days before disposing the check.
BankServe powers PayPal’s new feature, which currently is only available in the U.S. Moving the money from PayPal to your bank account will take an additional few days. PayPal Mobile, free to download, requires a PIN or password for every transaction.
PayPal Mobile already has a “bump” feature that lets you immediately move money from one PayPal user to another. In addition to moving around your money, you can donate from the app in a simple way. The 2.7 PayPal Mobile app also has a new feature that lets you search your transaction history.
Banks Led The Way
While Wednesday’s news certainly is exciting, USAA and Chase users already are familiar with the concept. Chase’s system, Chase Quick Deposit, involves a companion device that scans your checks. The scanned images are then transmitted to the bank, and monthly maintenance and scanner fees apply. USAA’s Bank@Mobile, compatible for iPhone or Android, is much like PayPal in that you snap a picture and the deposit takes place immediately. Bank of America and Citibank are working on similar apps.
Credit Cards in the Game, Too
iPhone users already can accept credit card payments, through apps such as Square and Mophie and Intuit’s Complete Card Solution. Square, which uses a device plugged into the headphone jack, reads the magnetic bar to receive the credit card payment. Complete Card Solution, a Square competitor, works in the same way. The former is free to set up, while the latter requires nearly $200 to set up, plus a monthly subscription fee of nearly $13. Square’s charges include 2.75 percent plus $0.15 for a swipe and 3.5 percent and $0.15 for keying in.