Check Imaging: A Cause for Celebration
BY DAVID WALKER
While check imaging has not met the expectations of some, its growth has been unprecedented.
Although the industry views the growth in check imaging as sluggish, actual volumes of images received by banking institutions are robust, growing faster even than Account Receivables Conversion (ARC).
The 2005 BAI/ECCHO CheckImage Conference was scheduled for New Orleans and I wanted to open the conference with a funeral band marching around the conference hall carrying a mock dead "check" to the mournful sounds of a musical dirge. Then, at the last instant, before the band trudged from the hall, the "check" would miraculously spring to life dancing to the celebratory sounds of New Orleans jazz.
The ravages of Hurricane Katrina forced us to "truncate" this plan — and relocate the conference to Orlando. But the concept is still reflective of the industry's distorted perception of the state of check payments. We continually lament our unfulfilled hopes regarding check imaging when, in fact, we should be celebrating what's been achieved. "Why?" you might ask. Isn't it true that two years after the effective date of the Check 21 Act, few institutions are receiving images and few checks are actually received as images by paying institutions?
Let's consider: during the month of September 2006, some 4,700 institutions, representing 28% of all U.S. institutions, received images (not substitute checks) totaling 152 million items. Is that a cause for celebration or disappointment? If your institution has not yet begun exchanging images and its objective has been to avoid being a pioneer, it has achieved that goal. The next objective should be to avoid eating dust at the end of the wagon train.
"But the volume is growing very slowly!" comes the rejoinder. Really? The average daily volume of images received during September 2006 was 7.6 million, which is 30 times more than the 0.25 million per day received by paying institutions in September 2005. The September 2006 average daily volume was also 11 times more than that posted in December 2005 and more than twice as much as was received in May 2006, just four months earlier. Early indications are that October 2006 volumes will show continued significant growth and set new records.
Still, people ask, "Why isn't this growth as fast as for the much-touted Account Receivables Conversion (ARC)?" Well, let's do the numbers. ARC transactions during the second quarter 2006 averaged 7.7 million in daily volume while images received by paying institutions during September 2006 averaged 7.6 million. With ARC's 29-month head start, that's a virtual dead heat. Victory to ARC?
For the quarter ending with the 21st month after ARC became effective under the NACHA rules, there were 73.9 million checks converted to ARC transactions. For the quarter ending with the 21st month after the effective date of Check 21, there were 266.1 million images received by paying institutions. That's more than three times the number of ARC debits! And, prior to Check 21, ARC had the fastest growth rate in the history of U.S. payments.
So let's dance and celebrate the unprecedented growth rate of check image exchange. While there is more to be achieved, it's time to grab a partner and Do-Si-Do.