Old Meets New: Using Smartphones To Scan Checks, PayPal-Style

When PayPal announced last week that its mobile application would be able to scan checks, it was a delicious marriage of the old and new worlds of payment. From the new: PayPal, a leader in the new wave of alternative payments, and the mobile app, the youngest of retail channels. And the old: paper checks, which are likely in their last generation—perhaps even last decade—of existence.

Todd Ablowitz, payment consultant and president of the Double Diamond Group, suggests that PayPal's check-capture-smartphone move—which puts it following financial old-timers including Chase Manhattan and USAA—makes it not such an upstart after all.

"The new PayPal mobile deposit product is interesting because it furthers PayPal toward being a bank-like entity. It sounds very exciting: I can just snap a pic of a check I want to deposit and, whammo!, it's in my account," Ablowitz said, adding that there's "a catch. The funds don't go right in my account. It takes three to five days to go in my account. Three to five days to get my money? Ouch! Why would I use that? PayPal, come back to me when I can get my money right away."

Actually, it could be slightly worse than that. PayPal is officially telling customers that check clearance might take as long as six days. The company handling the check processing for PayPal (BankServ) confirmed PayPal's timeframe but toned it down a little, stressing that six days is the maximum.

"Processing time for checks on PayPal's iPhone app is typically four days," but PayPal allows itself six days, said Brad Kvederis, BankServ's marketing director. "The six days is a couple of days too long" given that BankServ can do it in three days, Kvederis said, adding that the additional delay was "a business decision by PayPal."

As a practical matter, though, it's unlikely most consumers who are comfortable using checks would notice the additional delay. Still, it's a fascinating example of the newest technologies offering a bridge to those consumers who are still most comfortable with the older approaches.

PayPal calls its new capability, logically enough, "mobile check capture" and describes the service as one that "allows consumers to transfer checks into their PayPal balance by simply taking a photo of the check with their iPhone. Once photographed, just hold onto your check for 15 days and then you can throw it away," said PayPal spokesperson Yulimar Chiu.

No offense, but if I was using this new service, I'd wait to get some official confirmation that the money arrived before throwing anything away. Preferably—and this illustrates the generational divide at issue here—I'd want it in writing.

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