Silo Busters
By Julie Monahan
Developing an effective response to Check 21 requires a manager who can marshal resources company-wide.
On the surface, Check 21 seems to be a simple piece of legislation requiring only a minor technical adjustment on the part of financial institutions. Look more closely, however, and the complexities emerge. The law slated to go into effect at the end of October lays the groundwork for a gradual shift in the payments system from paper-based to electronic processing and requires a multi-faceted response from financial providers.
Such a multi-faceted response inevitably requires coordination; it can't simply be left to the operations department. For that reason, major banks across the country have established task forces headed by a senior operations or payments executive to marshal resources from across the organization. The role of the task force leader, or Check 21 "czar," is to help prepare the institution for the Check 21 transition specifically and also to help plot a long-term payments strategy.
These task force leaders face a formidable challenge, since the banking industry is prone to siloed operations and decision-making. People and systems that formerly operated fairly independently of each other now must come together. "It's a new way of thinking and operating for most banks," says Steve Madura, executive vice president of transaction services at Compass Bancshares Inc. The 56 year-old Madura, who has worked in transaction services for most of his 32-year banking career, was appointed to the Check 21 coordination role at the Birmingham, Ala.-based Compass last November.
Most Check 21 task force leaders, like Madura, come from the operations or payments side of the bank, since expertise in check processing is a key requirement for the job. But some institutions are experimenting with other leadership approaches. Chicago-based Bank One Corp., for example, has two Check 21 leaders, one from operations and the other representing consumer payments. Wachovia Corp. has appointed one executive to lead the overall Check 21 task force and another to handle customer service issues.
Clearly, cooperation across the organization is essential for institutions as they formulate an effective response to the Check Clearing for the 21st Century Act, which President Bush signed last October.
Cooperative Effort
Although Check 21 does not legally mandate an industry transition to imaging technology, it certainly will accelerate that trend. Any institution that wants to preserve for itself a place at the payments table will need to plan for this transition from paper to electronics. And since payments are integral to most activities in banking, the planning process needs to include most major operating units.
"What works well is a detailed plan that incentivizes everyone to focus on the needs of the organization, as opposed to individual silos," says Hans Myklebust, managing director of Global Payments Consulting, the Check 21 advisory services division of Carreker Corp. in Milwaukee. Mylkebust adds that detailing the tasks ahead and publishing a record of completed items helps to speed decision-making and establishes accountability for specific goals that support an institution's overall strategy.
Different banks try to accomplish this "silo busting" in different ways. At Compass, for example, five committees representing most major business lines meet regularly to discuss the issues of systems implementation, risk and fraud management, training, workflow processes and product development. Subcommittees, meanwhile, focus on legal and compliance strategy, float and transportation issues, and finance. Madura, as project manager, works with sponsors from each group to drive initiatives.
Similarly, the Check 21 steering committee at Bank of America Corp. includes officers from the retail, wholesale and operations sides of the company. Jon Wilk, senior vice president of payment strategy and chairman of the payment leadership council, says this structure ensures the committee is both "business-driven and tech-driven and that we have the right blend of representatives to make strategic decisions."
Another way of breaking down organizational silos is to put more than one executive in charge of the task force. Bank One, for example, has divided Check 21 duties between Tony Gerevics, vice president of float, transportation and ECP strategy, and Bob Wilson, senior vice president of consumer payments solutions. Gerevics contributes the technical and operational perspective, while Wilson looks at Check 21 from more of a business perspective.
The goal is to leverage two different kinds of expertise. Gerevics has extensive operations experience, with a specialty in transportation and float management, while Wilson has a background that encompasses cash management, operations, marketing, sales and product management. "We're joined at the hip in this organization," Gerevics says. "Technology and operations enables the lines of business in what they want to do."
Wilson says he has found it helpful to have the task force led by two senior level executives. "By working as a team, we can jointly see what's on the horizon and how it lines up with our priorities."
Visionaries Required
Although Check 21 is usually viewed as a technology issue, there are customer service and marketing concerns as well. When the law goes into effect at the end of October, customers will begin to see so-called "image replacement documents" in their imaged statements, or paper copies of IRDs if they still receive their cancelled checks.
To head off confusion and complaints, banks will need to inform customers of the coming changes and also try to convince them of the advantages of images, since no bank is eager to deal with the more costly paper IRDs. Bank employees must also be trained to handle these matters.
Acknowledging the customer aspect of the Check 21 transition, Wachovia appointed an executive to focus solely on customer education. That's Carol Malicki, senior vice president and strategic migration leader in operating services, who is developing tailored communications packets for the bank's consumer, small business and large corporate customers. Meanwhile, James Hicks coordinates process and operations projects for the 20-member task force. Hicks is senior vice president and group executive, operating services, at Charlotte-based Wachovia.
Another complicating factor for all Check 21 task force leaders is the need to look beyond the legislation to the future of the payments industry. To that extent, the job requires some of the characteristics of a visionary. "What we try to do in strategy is look ahead three to five years," says Mitchell Christensen, executive vice president of the payment strategies group at Wells Fargo & Co. "Then, we hand those concepts off to our separate business lines so they can build the actual products."
This task is made explicit at ABN Amro Services Company in Chicago, the operations arm of Netherlands-based ABN AMRO NV, where first vice president of business strategies Patrick Gutmann heads a "Check Futures" committee. The committee's job is to investigate issues relative to Check 21, check electronification and the future of payments in general. It works closely with operations, sales and product management. Gutmann says this format puts all sides on an equal footing so that they're better able to hash out effective programs.
Despite all the challenges they face, Check 21 task force managers see opportunity ahead. "This will revolutionize check clearing and processing, and it's exciting to be involved in figuring out exactly how," says Jim Blasingame, executive vice president and manager of bank operations at First Tennessee National Corp., Memphis.
Julie Monahan is a freelance writer based in Seattle.