RDC 2.0 – Achieve 5-digit dollar savings in Bank Lockbox Fees

What you’ll learn

  • Examine why check payments dominate the market and the problems associated with it.
  • Learn how RDC can integrate remote check deposits through cash application.
  • Learn the benefits of RDC 2.0 and how it can lead to better processing speeds at lesser costs.


Accounts Receivable (A/R) teams in small to medium businesses (SMBs) are stuck between check-heavy receivables processing, expensive lockbox services, dismal, time-consuming Remote Deposit Capture solutions and the high manual reconciliation required for growing volumes of ACH and other electronic payments. The introduction of RDC 2.0, next-generation Remote Deposit Capture technology, cuts the expenses of bank lockbox fees and processing while achieving end-to-end deposit and reconciliation for check payments. This blog will address the issues related to:
  1. Check processing costs
  2. Check float reduction
  3. Resource requirements

Paper Checks Continue to Dominate the Payments Landscape

The most powerful trend in B2B payments is the rapid adoption of e-payments. Buyers are spoiled for choice when it comes to choosing a form of e-payment between ACH, credit cards, and wire payments. What is difficult to digest is that paper checks continue to dominate the payments landscape (48% of volume) and this dominance is larger for payments coming in from small and mid-sized businesses. Pie chart Source: Payment Trends, Preferences & What Works for Credit-Receivables Professionals, NACHA – The Electronic Payments Association Many studies indicate that for A/R teams at small and mid-sized businesses, the volume of incoming paper checks maybe a whopping 75%! This leaves SMBs in a dilemma since they only have three choices –do everything manually, use Remote Deposit Capture (RDC) solutions, or pay for expensive lockbox services.

Key Challenges in Check Processing

Despite checks being the Achilles’ heel for A/R departments, suppliers have no choice but to accept the payment preferences of their buyers.
The challenges with processing checks could be classified as follows:

Speed of Payment Processing

The major disadvantage for suppliers is that checks come with a float of approximately three days. This is also one of the reasons check payment is favored by buyers.
But then there are several external factors that come into play and further delay processing. The reason for slow processing could be attributed to scanning checks and remittances separately, depositing payments in the bank, and manually keying-in data for reconciliation. Together, this delays payment reconciliation by three to five days.
This is why suppliers are reluctant to accept checks – payments hit the bank much later than the actual payment date and suppliers end up having to support longer credit terms than intended.

Processing Costs

According to a survey by the Association for Financial Professionals, a company could end up spending as much as $30,000 for processing 20,000 checks a month.

Monthly cost of receiving 20,000 checks per month

Source: 2015 AFP Payments Cost Benchmarking Survey
According to the survey, receiving a paper check is five times as expensive as ACH!
For small and medium-sized businesses with low dollar value transactions, the cost of processing checks directly eats into the profit margin.

Resources Requirement from Credit and Collection Effort

Processing checks are low-value manual work and does not add value to credit or collections. A highly manual process means that teams have to deal with a lot of errors.
It is a double-whammy since check processing requires resources to be moved from other critical A/R functions including credit and collections.

Options Available for Check Payment Processing

For processing checks, SMBs are largely dependent either on internal manual processing or expensive lockbox services offered by the banks. Both of these options either drain internal resources or money.
The options available for check payment processing are:

  1. Traditional In-house Processing
  2. Remote Deposit Capture (RDC) Solutions
  3. Bank Lockbox Services

Traditional In-house Processing


Traditional bank service workflow

Most companies prefer to keep their operations in-house and thus choose to do the keying-in and payment reconciliation themselves. Even though traditional in-house processing involves a lot of manual work, it is still a cost-effective alternative to the lockbox.


It lies somewhere between cost-intensive and cost-effective. Even though this process mitigates high lockbox fees, high resource allocation for the labor-intensive work greatly reduces the cost benefits.


It is a time-intensive process since manual intervention is needed every step of the way, from making scanned copies to depositing checks in the bank to manual reconciliation.  As it is, checks come with a float of three days. On top of that, time lag due to the above processes is directly reflected in processing time. The extra days get added to the company’s DSO and impact working capital.

Resource Requirement

Plenty of low-value manual work is associated with processing checks, including physical delivery of checks to the bank on a daily basis, scanning check payments, and remittance reconciliation. All these are time-consuming activities, especially when a company receives hundreds of checks every day.
Apart from that, manual cash application requires a high employee count due to variability in incoming payment volumes. Analysts manually link the checks and open invoices together and feed the data into a spreadsheet. Once that gets done, they typically have to process a high volume of cash posting exceptions. Only after all of this is the cash posted to the ERP system.

Remote Deposit Capture

remote-deposit-capture-workflowRemote Deposit Capture workflow

In 2004, Panini launched the MyVision X check scanner and gave birth to the concept of Remote Deposit Capture. This scanner was able to scan large batches of check payments and transmit an image directly to the bank for processing.


The Panini Scanner is not a large investment, and RDC cuts down on the costs associated with manual handling and transportation. However, the cash application is still manual, and the company needs to bear resource costs.


RDC reduces the processing time of checks by remotely delivering checks to the bank since RDC could potentially process the checks the moment they arrive.  This also cuts the processing time by one to two days as the bank doesn’t have to scan the remittance and key-in details.

Resource Requirement

RDC still requires a human to operate and scan the checks (for transmission to the bank), and remittance (for cash application) is handled separately. Also, since the subsequent cash application process is still manual, resources need to be allocated.

Lockbox Service


Lockbox service workflow

With rising volumes of check payments, banks stepped in to ease the processing of high volumes of checks with their lockbox processing services. If you believe that lockbox services are for your organization and are looking for ways to save costs on lockbox services, watch this webinar recording.


Lockbox services improve the efficiency of cash application and free up some resources from the A/R team. But then, as the age-old cliché, goes “there is no free lunch.” Companies end up paying a fortune for lockbox services. Banks charge for capturing remittance data and transmitting it back to the company. According to a survey conducted by Credit Research Foundation, the lockbox services that banks charge their customers for are highlighted below:

cost of lockbox services

Cost of lockbox services

Looking at the different components, the bank could end up charging $1 to $3 for a single check. A company receiving tens of thousands of checks a month could easily be looking at six-figure lockbox fees for the whole year. This directly harms the bottom line.
A cost analysis of lockbox fees for a typical SMB indicates that a company could end up spending almost fifty thousand dollars annually.

Get a detailed cost analysis of your potential lockbox savings by downloading this free ebook.


The lockbox service streamlined the check processing turmoil by expediting the workflow. It got rid of various low-value tasks such as:

  1. physically delivering checks to banks
  2. individually scanning checks and remittances
  3. entering payment and remittance information into a spreadsheet

Resource Requirement

Even after paying a huge sum to the bank for their lockbox service, the payment processing is still not 100% straight-through. One issue is the format of the lockbox file, and this matters a lot. 80% of the time, the lockbox file has to be first re-configured before any value is extracted from it. Many companies create macros and formulas to do this. However, this is a time-consuming and error-prone process, definitely not the rosy picture we looked at, to begin with.
After this, the A/R team still has to handle exceptions. The data key-in by the bank captures only limited header level information, and it is often insufficient to successfully reconcile payments with open invoices. 38% of banks do not key more than Check Number, Check Amount, and Invoice Number.

Impact on manual work due to lockbox file

The bottom line, there is additional work involved that requires manual effort from your team and adds to the costs. Hence, the lockbox is an unpractical luxury for SMBs.

Remote Deposit Capture 2.0: Next Generation Remote Deposit Capture

To address the challenge of traditional Remote Deposit Capture, companies have started using traditional RDC in conjunction with Artificial Intelligence-enabled cash application, in what has been termed RDC 2.0. RDC 2.0 integrates remote check deposit with straight-through cash application.

RDC Integrated with Cash Application


RDC Integrated with Cash Application

Step 1. Scanning

Unlike traditional RDC scanners, RDC 2.0 is able to scan checks and remittances together in one batch. Each batch is capable of scanning up to one hundred checks in one go. Once the checks are scanned, the solution captures data with high accuracy and precision with its built-in magnetic strip-based MICR capture and OCR-based data capture.

Step 2. Transmission of enriched file

With the scanned data, the solution creates an enriched electronic file consisting of the payment details in a bank-compatible ICL (Image Cash Letter) format for transmission to banks. The solution also creates a processed electronic index file of the payments received for internal cash application. This omits the need for analysts to key payment data into a spreadsheet.

Step 3. Real-time cash application

  1. The received electronic index file of the payments is auto-matched with the scanned remittance information.
  2. The open A/R invoice details are pulled from the supplier’s ERP system.
  3. The payment details are individually linked with the line-items in the open A/R.
  4. Cash is auto-posted in the ERP.

All of this happens entirely straight-through without the need for any manual intervention.

Scanning of Checks and Remittances with RDC

Benefits of RDC 2.0

  1. Straight-through process: The solution is capable of capturing check payments and remittances accurately and handling exceptions. The solution achieves a posting hit rate of more than 95%.
  2. Cost-Effectiveness: RDC 2.0 is feasible for SMBs because of its high cost-savings. The areas where RDC cuts costs are:
    • An RDC scanner is a one-time investment and very cheap to procure. It may also be paid for via monthly subscription instead of an up-front
    • Expensive lockbox services. This could generate up to six-figure savings.
    • Costs required for resources just for keying-in data
    • Transportation and manual handling costs
  3. Compatibility: Since RDC 2.0 solutions rely on the integration of regular RDC scanners with Artificial Intelligence-enabled cash application solutions, they are inherently compatible with most popular RDC scanners available on the market, including the one on your desk.
  4. Bank and ERP Agnostic: The solution is independent of the type of bank or ERP the supplier uses. This enables business scaling, both in terms of revenue and locations.
  5. Real-time Cash Application: The moment the checks hit the company, they get scanned, processed, and posted into the ERP

RDC 2.0 - Speed, Cost and Resource Requirement Analysis


Everything happens in real-time. As soon as the checks are scanned, they are deposited in the bank and processed for cash application and posting.


RDC 2.0 eliminates the costs required for lockbox services or for in-house data keying-in and manual reconciliation of payments and remittances, resulting in big savings.

Resource Requirement

RDC 2.0 is a straight-through process, providing end-to-end automation, thereby enabling your team to focus on high-impact work across credit and collections.
Get a detailed comparison of 1. RDC 2.0 vs. RDC vs. Lockbox vs. Traditional Processing by downloading this free ebook.

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HighRadius Cash Application Software enables the end-to-end automation of the cash application process that covers major benefits such as AI-enabled data capture for remittances, auto-linking of payments with open invoices, cost-cutting on lockbox fees and easy compatibility with any system due to its ERP-agnostic Saas infrastructure. Apart from the major benefits that it has, there are some key features which can not be missed out, some of them are Email Remittance capture, Discounts and Deductions Handling, Check Remittance Capture, Web Remittance Capture, Invoice Matching, and RDC & Mobile Payments.