As the COVID-19 business restrictions are lifted, many companies that were closed, as well as those essential businesses which remained open, will be looking for more efficient ways to do business. Better management when it comes to handling day-to-day banking needs is likely one process that might be examined. Remote deposit capture and merchant service systems may be worth considering.
A survey done prior to the COVID-19 situation revealed that two-thirds of small-to-mid-sized businesses made branch bank deposits weekly and one-third visited their bank’s branch office daily. These visits are primarily driven by the need to have timely access to the funds available from customer’s checks. When non-essential firms reopen, they may have fewer employees. That means that “sending someone to the bank” may not be practical. These companies, as well as those that have been operating as essential, will hopefully find themselves with significantly increased business as customers return from the COVID-19 hiatus, resulting in the need to find more efficient banking
The replacement for trips to the bank may well be a technology-based deposit process known as Remote Deposit Capture (RDC). In 2013, Congress passed the Check 21 Act allowing banks to clear checks after receiving visual images of them. This enabled interbank check clearing by allowing banks to electronically exchange check images and benefitted companies that regularly receive a large number of checks. Over time, the combination of lower-priced equipment and improved internet technology began to make RDC affordable for small businesses.
A company’s bank can help it implement an RDC system according to Rebecca Diaz, branch vice president of Legacy Bank. “All that is needed is a computer, an internet connection and a check scanner which many banks will install for their customers. An employee can scan each check received. The digital image is transmitted to the bank over the Internet which accepts the visual image of the check and deposits it to the firm’s account.”
During the COVID-19 closedown, many people and businesses found themselves purchasing goods and services at retail stores with a credit or debit card rather than cash, which is more difficult to obtain when confined to your home. As more businesses in multiple categories begin to reopen, it is anticipated that customer traffic and online purchase volumes will increase while customer’s reliance on credit and debit cards will continue. “This may lead more businesses to consider implementing merchant services technology to accept those payments,” says Diaz. Only three things are required: a credit card merchant account, a bank account and a way to process payments.”
To implement merchant services, any business that wishes to accept credit or debit card payments can purchase or lease a processing terminal from their bank that connects to a telephone line or to an internet connection. The customer swipes their credit or debit card or an employee manually enters the card information into the terminal. The data is then sent to the issuing bank to be verified and approved. The terminal prints copies of the receipt for the business to keep and for the customer to sign, unless they have opted for paperless transactions. After a given period of time--a few hours or a few days--the merchant will close the batch of sales by electronically sending it to the bank. Then, in one to two business days, the funds will transfer directly into the merchant’s bank account.
There are other aspects to establishing a merchant services account, such as providing the bank with the firm’s business and financial information. There are also costs involved. The bank being considered can provide the information it requires to set up a merchant services account for your business.
This article is a part of the Forward Thinking Education Series presented by Legacy Bank, the Latino Chamber of Commerce and the Pueblo Chieftain. Webinars further discussing this and other financial topics can be found on the Latino Chamber of Commerce Facebook page at: https://m.facebook.com/PuebloLCC/
Rebecca Diaz is a branch vice president for Legacy Bank. Diaz was top of her class at the Graduate School of Banking at Colorado and has been recognized as the Latino Chamber’s 40 Under 40 award recipient. An avid Pueblo County volunteer, she has spent 12-years primarily in community banking advocating for local businesses and residents.
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Reverse Mortgages were created in 1961 to allow qualified homeowners to convert their home equity into cash without selling their home or taking out a home equity loan. Historically, reverse mortgages have allowed people to generate funds to cover a wide variety of living expenses without tapping retirement or savings accounts.
In the few short months since the arrival of the COVID-19 pandemic, many people have had their income reduced or halted, watched the value of their retirement plans deteriorate and are being advised to build up, not tap their savings account. According to Fidelity, the average 401(k) and IRA was down 19% and 14%, respectively, by the end of the first quarter of 2020. The recently enacted CARES Act allows some people affected by the COVID-19 crisis to borrow up to $100,000 from their 401(k) plans and to withdraw money they have contributed without paying a tax penalty. However, these funds will have to be repaid and income taxes will still be owed on withdrawn money.
Given these circumstances, qualified individuals who have a significant amount of equity in their homes may find Reverse Mortgages as a viable source of funds.
Rebecca Diaz, Branch Vice President of Legacy Bank explains who qualifies for a Reverse Mortgage. “To qualify, an individual must be at least 62 years of age. They must either own a house, condo or townhouse free and clear or have at least 50 percent equity in their home. The equity is based on current market value, not what the owner paid for the property. Depending on the lender’s loan policy, a manufactured home built on or after June 15, 1976, may also qualify. You can also utilize a reverse mortgage for the purchase of a new property, as long as you are a qualified Reverse Mortgage borrower and a sufficient amount of cash is available for the down payment.”
The lender providing the reverse mortgage lends the home owner an amount equal to their equity. These funds can be received by the borrower as a single lump sum, a fixed monthly payment for a certain period of time, a lesser fixed monthly payment for the life of the loan, or a line of credit. There can also be a combination of different advance structures. Speak with your lender to find the best fit for you. These funds aren’t taxable as the IRS considers the money to be a loan advance. Interest accrues on the funds advanced. That interest is rolled into the outstanding loan balance which means that there is no monthly payment due from the homeowner.
“There are fees involved,” notes Diaz, “including a lump sum for mortgage insurance, loan origination and servicing fees like appraisal, title search and insurance, inspections, recording fees, etc. Most lenders will allow borrowers to finance these costs into the loan when sufficient equity is available.”
A homeowner with a reverse mortgage is required to pay property taxes, maintenance and property insurance. Standard Reverse Mortgage loans do not utilize an escrow account. A Reverse Mortgage cannot be in a second lien position. If there is an existing traditional mortgage and/or a Home Equity Loan already in place, those loans must be paid off with cash or with proceeds from the Reverse Mortgage. At least one of the borrowers must live in the home for a minimum of six months of every year in order for the home to be considered their primary residence. Eventually, when the homeowner moves or dies, the home is sold. The proceeds go to the lender to repay the Reverse Mortgage’s principal, interest, mortgage insurance, and fees. Any additional funds from the sale go to the home owner, if still living, or to their estate. In some cases, heirs may choose to pay off the mortgage and keep the home.
If the home is owned by a married couple and both hold title to it, both can be classified as borrowers. Should one spouse die, the other can continue to have access to the Reverse Mortgage proceeds and live in the house. If only one spouse has the title to the home, both must consent to the loan though the other spouse will not be an actual borrower. If the surviving spouse wants to keep the home, he or she will have to repay the loan through other means.
“There are several types of Reverse Mortgages structures and a lender can review them with an interested home owner. While they were never conceived as a financial tool for a pandemic, they may be a viable option for many people today,” Diaz concludes.
Rebecca Diaz is the Vice President and leader of Regency Business Development for Legacy Bank. Mrs. Diaz was top of her class at the Graduate School of Banking at Colorado and has been recognized as the Latino Chamber’s 40 Under 40 award recipient. An avid Pueblo County volunteer, she has spent 12-years primarily in community banking advocating for local businesses and residents.
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The financial damage to retailers resulting from people making online purchases before and during the pandemic has been substantially documented. A recent LexisNexis® Risk study notes that every $1.00 of fraud now costs U.S. retailers $3.36. The cost of fraud for strictly online merchants is even higher.
“These figures focus on larger businesses, but small and mid-sized retailers are not immune to this problem,” says Amy Good, branch banager of Legacy Bank University Park location. “According to the Association of Certified Fraud Examiners small businesses lose a median of $200,000 before most fraud schemes are uncovered. Fraud is increasing as businesses encourage people to buy online and pick up purchases at the store or get home delivery.
According to Good, retailers seeking to reduce fraud should familiarize themselves with highly used fraud concepts and the abbreviations, jargon, and terminology used to describe fraudulent activity starting with CNP (Card Not Present). This refers to scammers using stolen credit card information to buy products or services online rather than produce the card in a store.
Other top terms include C&C (Click and Collect) which describes the process when someone fraudulently purchases an item online and then visits the retailer to pick it up and POC (Point of Collection) which means the actual curbside or in-store pick up process. Then there is also Friendly Fraud conducted by individuals who order items online, have them delivered and then deny ordering them in an attempt to secure a refund while still keeping the item. There is yet another twist. Sometimes the fraudster will use an individual’s credit card information and order an item to be sent to their home just to confirm that the card is valid before using it again for larger purchases.
“Retailers seeking protection from fraud loss should at least implement a do-it-yourself prevention program and may well consider adopting fraud detection technology if additional security is desired, ” explains Good.
Scammers aren’t interested in small, inexpensive purchases. As a result, retailers should be on the lookout for online purchases of items with a higher than average resale value or perhaps a large bulk order for smaller items that is larger than normal. After all, these ‘customers’ aren’t planning on paying for it themselves anyway.
Another clue is a rush order or overnight shipping request to an international address thus encouraging the retailer to hurry the order processing and not take the time to review its validity.
Curbside or in-store order pickup can be great for both customers and fraudsters. It might be wise to ask for identification when pickups are made. Honest customers understand when the reason for the policy is explained.
If a retailer’s bank sends an alert that a customer is seeking money back on a purchase it’s wise to see if this individual has placed other orders utilizing the same card data, telephone numbers, physical addresses or email addresses. Chargeback Gurus, a firm specializing in this area, notes that 83 percent of people purposely committing friendly fraud do so more than once.
Many small retailers may choose to retain fraud prevention technology firms. Their services can be used to identify suspicious looking transactions which can then be reviewed by store personnel for discrepancies and irregularities. The numerous firms providing this service can easily be identified through an internet search.
Amy Good is the branch banager of Legacy Bank University Park location.
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It’s common today to hear people talking about change, but they aren’t discussing COVID-19 or political unrest. They are talking about actual change like nickels, dimes and quarters, why they are in such short supply and how this is impacting their shopping experiences. It’s also common to see more people acquiring and using debit cards to pay for retail purchases.
To understand both developments it helps to understand how coins make their way through the economy. If you put change in a vending machine, the owner empties the machine and takes that change to the bank. If you regularly empty your pockets at night and put those coins in a jar, you eventually take that jar to the bank to receive paper money or put it in your account. In turn, banks provide those coins to businesses who need them to make change.
“After the pandemic hit, most people stayed away from facilities with vending machines and other coin-based businesses and those folks with jars of coins at home chose not to take them the bank so these sources of coins dried up,” says Amy Good University Park Branch President of Legacy Bank.
It’s logical to ask why more coins were not produced. The answer is that the U.S. Mint’s ability to ramp up coin production was slowed down as the Mint began protecting its employees from the coronavirus infection. Because of the resulting shortage, the Mint made changes in the amount of coins allocated among banks so many banks did not receive their normal supplies.
Retailers and consumers have adapted quickly. All purchases at self-service checkout lines at many large retailers require payment to be made with credit or debit cards. Other stores or cash lines at large stores ask customers to donate the change they have coming to a charitable organization with which the retailer has made arrangements. Some stores may also apply the change to a customer’s rewards or loyalty card if they have one and the amount will be credited to their next purchase.
Shoppers responded as well. Many who have historically used credit cards or cash to buy things, are recognizing that a third method, a debit card, is a convenient answer to the shopping issues caused by coin shortages.
“If you have a bank checking account issuing a debit card is simple and just requires a request from the customer,” notes Good. “Rather than cashing a check or going to an ATM to have spending money, you can use the debit card for those purchases. It helps the local economy and makes shopping easy for both the consumer and the retailer.”
When you make a purchase with the debit card, the bank withdraws that exact amount from your checking account and provides it to the retailer. You can visit your account balance on the bank’s website to confirm the transaction. In some cases the purchase will be noted as “pending” while the transaction is being cleared but the amount has been deducted from your available funds.
For those without debit cards, your bank is a great source of help. “Getting a debit card in most cases is a quick and easy process,” comments Good. “A few steps and most banks can have a card to you in a few days; don’t forget to bring your change to deposit when you come in. Every step helps,” Good says with a smile.
As more businesses open and consumers again start using vending machines and visit the laundromat or coin-operated car wash the amount of coins in circulation will increase. Consumers who have jars of coins in their cupboards are encouraged to take them to their bank as often as possible. Many bank lobbies are now open to handle this transaction but if not, they will make an appointment to come to the bank and turn in coins.
Amy Good is the University Park branch president for Legacy Bank. Good has extensive experience ranging from government to the public sector. An avid Pueblo County volunteer, she has spent 15 years of her career in finance advocating for local businesses and residents.
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