Lockbox Banking

What is 'Lockbox Banking'

Lockbox banking is a service provided by banks to companies for the receipt of payment from customers. Under the service, the payments made by customers are directed to a special post office box, rather than going to the company. The bank will then go to the box, retrieve the payments, process them and deposit the funds directly into the company bank account.

BREAKING DOWN 'Lockbox Banking'

As with most payment processing services, there are both pros and cons to lockbox banking.

As benefits go, lockbox banking provides companies with a very efficient way of depositing customer payments. This is especially beneficial if a company is unable to deposit checks on a timely basis and/or if it is constantly receiving customer payments through the mail.

On the other hand, lockbox banking can also be very risky. Bank employees who have access to lockboxes are rarely supervised, which opens the situation up to possible fraud. The fraud primarily occurs in the form of check counterfeiting because the checks that are in the lockboxes provide all the information needed to make counterfeit checks. Companies can protect themselves from such fraud by using a bank that they trust and by constantly monitoring their lockboxes.

RELATED TERMS
  1. Check

    A written, dated and signed instrument that contains an unconditional ...
  2. Remote Disbursement

    A cash-management technique that some businesses use to increase ...
  3. Bank

    A financial institution licensed as a receiver of deposits. There ...
  4. Payment

    The transfer of one form of good, service or financial asset ...
  5. Automated Clearing House - ACH

    An electronic funds-transfer system run by the National Automated ...
  6. Cash On Delivery - COD

    A type of transaction in which payment for a good is made at ...
Related Articles
  1. Economics

    Online Investment Scams Tutorial

    To bamboozle someone out of their money is an age-old ruse. Learn about some of the gimmicks modern-day swindlers use and avoid becoming a statistic.
  2. Insurance

    Identity Theft: How To Avoid It

    Don't be a victim of this disturbing crime. Get insight into how perpetrators commit this form of fraud.
  3. Investing

    The Biggest Stock Scams Of All Time

    Where there is money, there are swindlers. Protect yourself by learning how investors have been betrayed in the past.
  4. Credit & Loans

    Identity Theft: Who To Call For Help

    If your identity is stolen, it's critical to act fast. Find out what to do if it happens.
  5. Stock Analysis

    Top 4 Companies Owned by JPMorgan (JPM)

    Read about JPMorgan Chase & Company's main operating subsidiaries, including its retail and investment banking operations and its global asset management firm.
  6. Active Trading Fundamentals

    Wells Fargo's 3 Key Financial Ratios (WFC)

    Look at some of most important financial ratios for with Wells Fargo & Co. and understand why they are so important for analyzing the bank's core business.
  7. Stock Analysis

    What's Ahead for U.S. Commercial Banks (WFC, JPM)

    U.S. commercial banks should benefit from higher interest rates, but anxiety about worldwide economic growth has generated active selling pressure.
  8. Fundamental Analysis

    Bank of America's 4 Most Profitable Lines of Business (BAC)

    Discover how each of Bank of America's primary lines of business impact the company's bottom line and learn about the factors that affect each one.
  9. Investing News

    Top 5 Positions in David Dreman's Portfolio (ASB, WTFC)

    Explore David Dreman's top five holdings, and learn about Dreman's investment philosophy. Discover how the portfolio reflects a contrarian philosophy.
  10. Stock Analysis

    Bank of America's 3 Key Financial Ratios (BAC)

    Discover some of the key financial ratios that show the quality of Bank of America's loan portfolio and how profitable the bank has been.
RELATED FAQS
  1. Does identity theft or credit card fraud also occur with cash-on-delivery?

    Understand the process of cash on delivery (COD) as well as where identity theft and fraud may occur and some techniques ... Read Answer >>
  2. Do banks have working capital?

    Learn the reasons why banks do not have working capital due to the lack of typical current assets and liabilities accounts, ... Read Answer >>
  3. How does investment banking differ from commercial banking?

    Discover how investment banking differs from commercial banking, the responsibilities of each and how the two can be combined ... Read Answer >>
  4. Why do commercial banks borrow from the Federal Reserve?

    Learn how commercial banks borrow from the Federal Reserve to meet minimum reserve requirements, and discover the pros and ... Read Answer >>
  5. What role does a correspondent bank play in an international transaction?

    Understand what a correspondent bank is and how it operates to facilitate currency exchange and financial transactions between ... Read Answer >>
  6. What is the difference between a correspondent bank and intermediary bank?

    Read about the differences between intermediary banks and correspondent banks, why their role is necessary, and where the ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center