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Canadians won't be able to deposit their cheques, regular or giant-sized, by taking a picture of them because of rules blocking such technology. ((Andrew Vaughan/Canadian Press))

A U.S. bank has taken the paperwork out of payments by allowing customers to deposit cheques by transmitting photos of them with an iPhone, but Canadian rules are blocking such technology from being used here.

USAA, a small bank based in San Antonio, Texas, that services mostly military families, will update its iPhone application this week to enable the feature, according to a New York Times report. Customers will have to take a photo of both sides of the cheque with the iPhone's camera, then send the images to the bank. They will not have to mail in the cheque later, as the entire transaction will be handled electronically.

"We're essentially taking an image of the cheque, and once you hit the send button, that image is going into our deposit-taking system as any other cheque would," Wayne Peacock, a USAA executive vice-president, told the newspaper.

Only customers who are eligible for credit and have some form of insurance with the bank will be eligible for the service, the bank said, in order to limit the potential for fraud.

In Canada, however, introducing such a feature would take at least a year. The Canadian Payments Association, which was created by an act of Parliament in 2001 to administer and manage how Canadians transfer money, does not include image capture on its list of acceptable transactions.

If a bank wanted to introduce a service similar to USAA's, it would have to apply for a change to the Bill of Exchange Act. Canadian Payments Association spokesman Geoffroy Montpetit said that process would take a year if it was dealt with quickly, or longer otherwise.

"Banks are looking at this technology. If and when they are ready to move forward, then we'll obviously have to respond on the rules side," he said.

U.S. banks have their payment systems governed by a similar association, but that body allows image capture.

Montpetit said Canadian banks are looking at image capture technology, as well as a host of other electronic payment options, and their introduction is inevitable.

"These types of things certainly don't come as a surprise. The industry is moving in that direction."

USAA has more than seven million customers and says about one million use cellphones to access their accounts. While mobile banking has been slow in taking off in the United States and Canada compared with Asian countries like Japan and South Korea, it is growing quickly thanks to web-enabled smartphones like Apple's iPhone.

Canada's big three cellphone companies, Rogers, Bell and Telus, announced a mobile payment system called Zoompass earlier this summer that allows customers to transfer money between themselves. Zoompass was released as an iPhone application last week.