USAA wants banks to pay for its technology

SAN ANTONIO — Officials at financial services giant USAA say their company developed the technology used by banks across the world to allow customers to deposit checks electronically, and it’s about time other institutions “pay their fair share.”

The San Antonio company is reaching out to banks and credit unions across the country, offering a “licensing program” to pay for patented technology surrounding “remote deposit capture” capabilities it developed in 2005.

Online banking represented a sea change in the banking industry after Congress passed laws in 2003 allowing lenders to handle more checks electronically — much like the ATM did when the first one was installed in London in 1967.

Mobile deposit, which came along a few years later, has been quickly adopted by consumers as more people use mobile apps and websites to conduct financial transactions. Consumers wrote about 19.4 billion checks with a value of $27.3 trillion in 2015, according to the Federal Reserve Board in Washington, D.C. Financial services research and consulting firm Celent says that about a third of all checks were deposited electronically in 2015 and about half last year.

USAA has sent out hundreds of letters seeking licensing fees for its intellectual property, which the bank says it has patented, and “asked banks and credit unions to reach out to us proactively to discuss the licensing program,” said Neff Hudson, vice president of corporate

development at USAA.

Hudson oversees USAA’s patent licensing portfolio.

So far it is unclear what effect this might have on the industry. Several banks that were contacted declined to comment, or did not respond. But if USAA is able to convince or cajole the industry into paying, it could be a windfall depending upon how the fees are structured.

“The reality is that it was invented here in San Antonio,” Hudson said. “It was invented here in San Antonio with money that our members give us to improve our business. And we have never received fair value for it in the marketplace.”

The San Antonio patent attorney said that if companies do not choose to pay up, then the next step would be for USAA to sue, which can be expensive, “especially one like this.”

“If you don’t enforce your patents, what good are they?” he asked. “If I was USAA, and if I had patents that covered remote deposit capture technology, if I had it and other people were using it, I’d either want people to pay me a royalty for its use or stop using it.”

USAA, which serves members of the military and their families, has about 50 patents associated with the technology, according to Hudson.

“This was an amazing groundbreaking technology,” he said. “It was invented for military people, and at the same time it has absolutely helped change the industry. From our perspective we’ve been really gratified to see that; we also need to make sure we get fair value for it because it is USAA-patented technology, and it was paid for by our membership.”

As for what banks might pay for the license, Hudson said that depends on “a couple of variables.” USAA is sharing its approach to pricing in conversations with banks to get feedback, he said.

“We have had some folks reach out and indicate a willingness to take part in the licensing program, but it’s still early in the process,” he said.

The licensing fee is purely for use of the intellectual property, not for technical support, Hudson said.

“This is really a license to keep what they already are using. So no technical integration is required. It’s just that we believe that the underpinning technology was provided by USAA,” Hudson said. “I don’t want to get into where they might have bought their solution, or what kinds of agreements banks may have with their vendors, but the bottom line is they’re using this technology, they’re using USAA technology for it.”

The big question that remains is what USAA might do if companies don’t pay up.

“Right now we’re really focused on the licensing program, and we are hopeful and optimistic that they will voluntarily comply with this licensing program,” Hudson said in response. “We’re not considering other options at this point.”