For all the work that banks have done to turn physical payments into digital ones, there remains one significant category of paper they can't digitize: cash.
But banks are now experimenting with a technique to give their business customers the equivalent of an electronic cash deposit, one in which the cash is not transported anywhere. Bank of America Corp. said Monday that it is testing an automated service that lets users deposit cash in specialized safes in their stores and receive immediate credit even though the notes have not left the building.
The safe is similar to one that Fifth Third Bancorp has been offering since the second quarter, and both companies say that accepting electronic cash deposits remotely can help them serve, and acquire, customers in areas where they lack branches.
"Our customers are becoming less geographically focused," Lisa Tiemeyer, a Fifth Third vice president and its receivables product group manager, said in an interview Monday. "Clients understand that they don't need a bank on the corner to have an effective banking partner."
She compared the Cincinnati banking company's Remote Currency Manager to remote check capture services, which let business users convert checks into digital images and transmit them electronically to a bank for deposit. Just as many banks have said that remote capture has helped them serve customers outside their branch footprint, Ms. Tiemeyer said, the remote cash deposit service has helped Fifth Third expand its reach. Though Fifth Third mainly serves the Midwest, she said, "one of our objectives is to deliver this product nationally."
Fifth Third has one customer using the service now, a large fast-food chain that she would not name, and it is in talks with other potential customers. More than 400 of the safes are in use nationwide, and Ms. Tiemeyer said she expects more than 500 will have been installed by yearend.
Bethann Johnston, Bank of America's product management executive for cash products, said that large retailers often sit on large piles of cash, sometimes for days, before they can deposit it. "There is a lot of cash trapped in the system," she said, where it "does not add value to the organization."
But B of A's service, which has no formal name, can solve the issue and give corporate users faster access to funds. The safes are linked electronically to the Charlotte banking company's networks, so when users deposit cash, they can get immediate credit for the deposit, though the money remains physically present in their stores. The safes also permit user to "withdraw" the same notes when they need cash.
Chick-fil-A Inc., the Atlanta restaurant chain, is testing the safes in three of its stores, though it uses them mainly to sort and count cash. Ms. Johnston said the automated deposit and withdrawal functions will be available in a few weeks. B of A expects to test the safes with fewer than five other companies; it has lined up a major department store chain and a boutique retailer. The service is expected to be widely available in the first half of next year.
The two banks' services have a few key differences, notably liability. With B of A, once the money is in the safe, it is the bank's responsibility. If the safe is stolen it is the bank's loss. Fifth Third is offering the service through a partnership with Brinks Inc., and does not assume ownership of the funds until the courier delivers the cash to the bank.
Also, Fifth Third's safes do not offer the ability to withdraw cash, Ms. Tiemeyer said. The bank charges a monthly user fee for the safe as well as a cash-service fee; Bank of America plans to charge a fee for the service but has not yet decided how much.
Mark Mullinix, an executive vice president at the Federal Reserve Bank of San Francisco and the product manager for the Fed's national cash product office, said that in some ways banks' efforts to enable virtual cash deposits is similar to a program the Fed introduced in 2006 called custodial inventory. Banks have long transported cash to a Fed site at night and picked it up again in the morning, but under custodial inventory, they can keep cash in their vaults but transfer ownership to the Fed and receive credit for a deposit.
Moving the cash around was time-consuming, and keeping it on hand means banks can put it to use faster. "It frees up opportunity. There's no lost earnings," Mr. Mullinix said, and expanding the custodial inventory model to retailers means banks can offer similar benefits to corporate customers.
Susan Feinberg, the research director in the wholesale banking group at TowerGroup, a research unit of MasterCard Inc., said remote deposit services mean "geography has become increasingly irrelevant for checks and now is becoming irrelevant for cash."
