Leading the Way

By Lauri Giesen

To ease customer concerns about Check 21, banks must lead the way in demonstrating its benefits.

Financial institutions are understandably preoccupied with the technological and procedural implications of Check 21, but smoothing the transition with customers ultimately may prove to be the key challenge. Millions of people still love their paper checks and won't be happy to find facsimiles returned in their monthly statements.

While federal law requires banks to notify customers of changes associated with Check 21, a greater outreach will be required to preserve goodwill, minimize complaints and inquiries, and promote other electronic services relating to checking accounts. "This is not just a technological change, but a change in how we serve our customers, and we need organized efforts that take customer communication to heart," says Jon Wilk, senior vice president of payment strategy for Charlotte, N.C.-based Bank of America Corp.

The Check Clearing for the 21st Century Act, signed by President Bush last October, doesn't mandate that financial institutions replace paper checks with electronic images of those checks. But it does require that institutions be prepared to accept "image replacement documents," or IRDs, in place of those checks. An IRD is simply a check substitute that can be imaged; institutions must be able to accept a paper version of the IRD if they can't process the image itself.

The upshot is that customers will start to see these IRDs in their monthly statements, either as check look-alikes or in imaged form. For the millions of customers still accustomed to having their original paper checks returned to them every month, this could prove unsettling. Proactive measures will be needed to avert a tidal wave of complaints.

"You don't want your call centers flooded with inquiries from people asking, 'What is this funky substitute?' You want to give people advance notice about changes and what those changes mean to them," says Phyllis Meyerson, senior vice president of the Electronic Check Clearing House Organization, a bank-owned national check clearinghouse based in Dallas.

Financial institutions are therefore putting a lot of thought and energy into educational programs, for customers and employees alike. Since employees are the key to reassuring customers about the changes wrought by Check 21, experts say, employees should be trained first, preferably starting now. Then, customers need to be contacted.

Institutions such as BofA and Wachovia Corp. have established task forces to decide what kind of information should be presented and through which channels. Check 21 experts recommend that this information go beyond the standard legal language required by the Federal Reserve and include a marketing plan to educate customers on the benefits of imaging, such as the ability to view cleared checks on a PC screen at the branch or in the home.

In this way, providers may be able to turn a chore into an opportunity.

Education Required

Although Check 21 has been touted as a revolutionary change for the nation's payments system, some customers won't see much of a difference. These people are already receiving check images in their monthly statements and probably won't be too rattled by IRDs, which will carry the same information that appears on the traditional check.

However, the changes could be unsettling to those people who still receive cancelled checks with their statements. Under Check 21, such customers will start receiving paper copies of IRDs for those checks that have been imaged. And while the paper IRD will resemble the traditional paper check, it clearly won't be an exact copy of the document that the customer originally wrote. So customers may wonder: is this thing really as good as my cancelled check?

The problem is compounded by the fact that the general public wasn't paying much attention when the Check 21 legislation moved through Congress last year. "The average consumer does not know anything about Check 21," says Stephen Ward, executive vice president of the item processing group for Brookfield, Wis.-based Fiserv Inc., a major check processor. "The only people who know anything at all about this are those who are directly involved."

Customers don't take kindly to surprises, as evidenced with check truncation, a process in which a customer's check is converted to an electronic form either at the point of sale or at the bank's lockbox. "We're already seeing some customer confusion about the electronic conversion of checks," says Sarah Hartman, executive vice president for electronic banking services for National City Corp., Cleveland.

When checks are truncated at the point of sale, customers at least get their cancelled check back. When the check is converted by an automated clearinghouse transaction, either at the lockbox or the point of sale, customers see the payment listed as an electronic transaction on their statements, similar to a debit card or an electronic bill payment. This has caused some National City customers to call the bank asking for the return of their original paper checks, according to Hartman, who sees even more potential for confusion when Check 21 is added into the mix.

To minimize transition shock, outreach programs need to begin at least four months ahead of the Check 21 implementation, says Carol Malicki, Wachovia's senior vice president of operating services. Institutions such as hers have already formed task forces to provide information for customers and training for staff. Wachovia's task force began meeting in January.

Consistent Message

It's a given that customers upset with the Check 21 process will seek answers at their local branch or call center. Bank employees, therefore, need to be thoroughly grounded in the mechanics of IRDs and imaging. Unfortunately, most of them hadn't been following the legislation either, so there's a steep learning curve within institutions.

"Large banks need to bring in experts and conduct on-site training and orientation sessions at all major locations. These sessions should include all the product management personnel, call center and branch employees," says Susan Goold, electronic clearing services product manager for Small Value Payments Co., a New York-based provider of electronic check services.

Even as employees are being trained, institutions need to plan what kind of information they will present to customers, and how. "We have to make sure we have a consistent message about Check 21 that is being communicated throughout our organization — be it through our print media, call centers or financial centers," says Wachovia's Malicki, who is based in Charlotte. "We need all these channels to build on a series of messages, repeated with sufficient frequency, so that customers understand any impact this will have on them before Check 21 even starts."

Bank of America has a task force, led by Wilk, grappling with similar issues. BofA, however, is going a step further — by considering whether this information flow needs to be customized to fit the needs of various consumer segments. For example, the message to customers who still receive their cancelled checks might differ from the message to those who accept imaged statements or view their checks on the Internet. In any case, messages intended for consumers are likely to be different from those that go out to business customers, Wilk says.

Since customers will begin seeing IRDs on their statements after Oct. 28, some bankers think this is a good time to do some proactive marketing by reminding customers that they can now view those check images online — if the bank is imaged-enabled — and print out copies if they wish.

In this way, Check 21 may actually offer banks an opportunity to differentiate themselves. Wachovia, National City and Bank of America, for example, all plan to use their Check 21 communications to promote services that allow consumers to view their checks over the Internet. Since many customers won't be getting their actual checks back anyway, banks hope to show them that if they really want to view those checks, the easiest way is to simply call them up on the computer.

"We would love it if this allowed us to move more customers to using our online channels. The benefits and advantages to these online services will be part of the message we intend to convey," Wilk says. Already, Wachovia and National City are reporting that they each get more than one million requests for Internet-based check images per month.

In touting the benefits of imaging, however, banks need to be careful not to overdo it. "It would be a mistake to make too big of a deal about these changes," says ECCHO's Meyerson. "A lot of people don't like change for any reason. So when pointing out any differences, continuity of service should be emphasized as well. With substitute checks, or IRDs, for example, customers will still be able to see their signature, the memo line and any endorsements on their checks."

Even as individual institutions work to present consistent Check 21 information throughout their organizations, Malicki argues it's important for banks to work together to develop uniform industry-wide messages. Since many consumers have checking accounts with multiple financial institutions, it doesn't do any bank any good to have confusing or contrary messages being communicated by the competition. "Banks need to work together through industry groups to develop common customer communications," she says. "This is not a competitive issue; it is a collaborative issue."

And the customer education efforts can't suddenly stop once Check 21 is implemented, or even a few months after. "This is an ongoing education process, not just a one-time deal," says National City's Hartman.

Ms. Giesen is a freelance writer based in Libertyville, Ill.

Copyright © 2004 by Banking Strategies, published by BAI.

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