To Share, or Not to Share

Much of the discussion about image archive is moving away from technology issues involving capture and storage capability to business questions about how banks should employ images. In basic image exchange, banks send each other MICR-line data plus the image of each check they present for payment. But in a sharing model, banks send those images to a central database, where the financial institutions involved view or retrieve the images only if they're needed.

John Lettko, CEO of Viewpointe Archive Services, believes evolution will favor image-on-demand, a sharing model. His Charlotte-based company operates what it bills as the largest information archive in the world, holding half of all check images and adding more than one billion new ones each month.

Paying banks need to review the images of fewer than 2% of the checks they process, Lettko says. "With full back-office automation, with full Day 2 automation, you might get up to 10%. But to move 100% of the items when you're only looking at a very small proportion is silly," Lettko says.

Costly, too. Viewpointe believes that sharing will be only half as expensive as industry-wide image exchange, as it eliminates the need for duplicate storage by capturing and paying banks as well as the need to transmit 100% of check images.

But Ted Umhoefer, senior vice president, product management and industry relations for Fiserv Inc., Brookfield, Wis., believes image-on-demand is further away than he thought it was five years ago. "Think about the challenges when you're providing image statements or image delivery to a corporate cash manager," he says. "Corporate clients move between banks for a five-minute difference in making information available. Image-on-demand works fine in an exception process, where you're only looking up one in a thousand items. But if you're creating image statements and you need all of those items, the efficiency of image-on-demand evaporates."

Bob Hunt, senior analyst at Needham, Mass.-based TowerGroup Inc., believes the industry will end up somewhere in between with images held at banks and a small number of external archives. He expects Viewpointe, the Fed, Fiserv and others to be providers of the external storage. "That doesn't say large banks won't have their own," he added. "I can see a bank maintaining its own archive for 30 or 45 days (during which 90% of retrievals occur) and then depending on third-party processors for long-term archive."

Hunt says the outcome will depend on how well third-party providers meet the service needs of the banks and how much that costs. Banks need a very high standard of customer response to encourage customers to embrace online access to their cancelled checks, he says.

Ray Gatland, image product development manager at Charlotte-based Wachovia Corp., says he has been involved in organizations across the industry that have tried to build a model around image-on-demand, and he says that probably is the far-reaching goal. But, he adds, there are a lot of interim steps needed to get to that goal, and ultimately, as part of going through those steps, the goal may change.

Customers and staff retrieve more than half a million images every business day from Wachovia's archive of 20 billion, Gatland says. "As long as there's a need for image statements, CD ROMs and image delivery — for the foreseeable future — you'll have an environment in which banks will want to have their images in their archive," he says. "It could be outsourced or in the data center, but the bank is going to want that available so it can service those products and provide exceptional customer service through this transition."

— Clint Swift