Lockbox Banking


DEFINITION of 'Lockbox Banking'

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.

  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. Automated Clearing House - ACH

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

    A type of transaction in which payment for a good is made at ...
  5. Payment

    The transfer of one form of good, service or financial asset ...
  6. Bank

    A financial institution licensed as a receiver of deposits. There ...
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. Savings

    Opening a Bank Account in Costa Rica as an American

    It shouldn’t be too hard to do, provided you have the appropriate documentation and forms. But be prepared for lots of paperwork!
  6. Credit & Loans

    Personal Loans: Compare the 6 Biggest Banks

    Need a personal loan? You may stop by one of these big banks for help. Their offerings vary in size, rates and loan types, which means you have options.
  7. Retirement

    What Was The Glass-Steagall Act?

    Established in 1933 and repealed in 1999, the Glass-Steagall Act had good intentions but mixed results.
  8. Personal Finance

    Best Ways to Send Money to the Phillipines

    When you need to send funds to friends or family in Metro Manila or elsewhere in the Philippines, these four services make it fast and simple.
  9. Markets

    The Biggest Companies in Silicon Valley

    Understand what types of companies are the most successful in Silicon Valley. Learn about the top six largest Silicon Valley companies by market cap.
  10. Economics

    What is the Cost of Funds?

    Cost of funds is the interest cost financial institutions pay to use the funds they deploy in their business.
  1. Does identity theft or credit card fraud also occur with cash-on-delivery?

    While cash on delivery (COD) is a system intended to typically reduce risk and fraud, as with any type of financial transaction ... Read Full Answer >>
  2. Do banks have working capital?

    The concept of working capital does not apply to banks since financial institutions do not have typical current assets and ... Read Full Answer >>
  3. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  4. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Full Answer >>
  5. What role does a correspondent bank play in an international transaction?

    A correspondent bank is most typically used in international buy, sell or money transfer transactions to facilitate foreign ... Read Full Answer >>
  6. What is the difference between a correspondent bank and intermediary bank?

    Correspondent and intermediary banks serve as third-party banks that coordinate with beneficiary banks to facilitate international ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center