Our spot check of the impact of Check 21 (we couldn't let Friday's one-year anniversary of the implementation date pass without a mention) touches on remote capture, substitute checks, new purposes for ATMs, returns processing gains, suppliers and contaminated checks.
Business-winning: In the next year, banks that offer corporate capture (the Check 21-enabled ability to image and electronically send check images from corporate sites) will win between $150 million and $200 million in commercial deposits from banks that don't offer remote capture. This forecast comes from Alenka Grealish, Celent Communications.
Reach-extending: Some of Bank of New York's largest remote deposit customers are located outside the U.S. The bank was one of the first to offer remote deposit, in November 2004. One year later, Anthony Gandolfo, head of deposit services product management, says it (remote deposit) has enhanced the bank's ability to "expand our deposit-gathering reach with our core customers in geographies we really haven't focused on in the past. We don't need, for example, to rely solely on correspondent clearing relationships, which can add cost to the process."
The bank made a "substantial investment" in imaging technology over the last five years or so, Gandolfo says. "Very early on, this bank decided it was going to be in the image world," he says. "Incrementally speaking, remote deposit was a relatively small piece of our overall investment in image technology."
Paper-pushing: An inadvertent but likely temporary phenomenon of bank readiness to send but not receive images is that 99.9% of the 1.9 million image items a week received by the Federal Reserve "end up being printed in substitute checks." This comes from a report by Fred Herr, senior vice president, Retail Product Office, Federal Reserve, at the 10th Annual CheckImage Conference, brought to you by BAI and ECCHO in late September. Herr said the Fed expects "to be printing substitute checks, at a higher rate than we anticipated, probably through the next 18 months."
Consumers are reluctant to turn off paper media for fear of giving up what they perceive as permanent, convenient and safe records.»more
ROI-yielding: In a year in which infrastructure was built and plans finalized, reports of business cases being demonstrated are rare. One exception: KeyBank used the occasion (and a significant investment in imaging technology from Exstream's dialogue and document design, development and delivery solutions from Prinova) to automate and streamline processes associated with retail account statements. Key's statement production can now dynamically include check images or substitutes, truncated statements -- those that include no checks -- and statements that still include physical checks. Savings include:
$1.5 million per year in postage and one to three days reduction in mail delivery (the envelope weighs less);
A reduction in the number of check sorters and sorter operators. Where they once sorted 800 checks per hour; now they're processing as many as 6,000 per hour, and with fewer errors.
How they measure success: Within 30 days of the first phase of implementation, KeyBank saw savings. The entire project, including its IT outsourcer's work and the technology purchase, achieved payback in just a little over a year. Feedback from client advisors and retail staff has been positive: 94% percent of all retail branches have opted in to the new digital imaging system.
ATM-reviving: Several programs underway expand the deposit-gathering use of the ATM. Earlier this month, Advanced Financial Solutions and Diebold announced an agreement to co-market an image-enabled ATM deposit capture solution, enabling the complete electronic processing of checks deposited at the ATM. Such a solution would enable the image to be captured remotely at the ATM, truncating the paper check at the earliest point of the process -- and initiating electronic clearing and settlement. Developments should enhance the value proposition of the ATM, Gary Nelson, AFS president said.
In a partnership with Ensenta and WesCorp, image capture ability has been added to the shared-branching kiosks operated by FSCC, a cooperative shared-branching network that operates 1,800 shared credit union branches in 43 states and six countries. According to a report on kioskmarketplace.com, "a member inserts a check (no deposit slip, no envelope), verifies the amount, and receives a picture of the check on the receipt. Ensenta uses optical character recognition and risk factor analysis to create the image files, which are sent electronically to WesCorp for processing."
Handy in natural disasters: The benefits of transferring images were demonstrated in September. The Fed's Contaminated Check Procedures for Depository Financial Institutions (DFIs) Impacted by Hurricane Katrina" urged the conversion of paper checks that were "subjected to floodwater that may have come into contact with sewage, chemicals or human matter that makes the items unsuitable for handling and personal contact ... and could create health issues for any party involved in the collection process."
Accelerating returns: One "extremely positive impact of Check 21," according to Solutran, is the reduction in the time it takes from the date a check is cashed to the date the check is returned. Solutran, whose business includes return processing services, says, "We generally see original return items in an average of 6.5 business days; substitute checks received in our operation center are arriving in an average of 5.6 business days."
In a "full-blown image exchange environment," Solutran anticipates a much greater reduction -- down to two to three business days.
More and more supplier choices: More than two years ago, Bank of America hired Jason Roach to source the suppliers the bank would need to work with to take full advantage of Check 21. Between then and now, says Roach, now senior vice president in supplier management, there are many more suppliers to work with. "Some suppliers we engaged six months ago didn't even have a product." Now, he says, "everything's been developed and now suppliers are trying to get market share." Some late entrants offer attractive alternatives and it's in the bank's interest to cointinually re-evaluate the portfolio of suppliers, Roach says.
Roach says he's seeing a lot of competition on the front piece of image-related work, where high volume purchases are required. Suppliers include NCR, Alogent, Unisys, Carreker, Diebold, Digital Check and Panini. But, he says, the choice of suppliers is still limited for companies capable of doing internal software builds.
"As I look at the portfolio [of suppliers] that we have the one that shocks me is Orbograph," Roach says. Not a traditional supplier to the industry, Orbograph is an example of a company able to enter the market and offer a competitive solution based on manufacturing principles, Roach says.
Some Check 21 data points: About $3 trillion a year is currently being replaced with substitute checks ... Branch deposit automation deployments include the more than 18,000 seats that Alogent Corp. has installed at JPMChase alone . NetDeposit remote capture products (software and desktop scanners) are installed in almost 2,000 customer locations; in May, it reported averaging 30 rollouts to corporate customers per week.
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PAPER STATEMENTS: EXPENSIVE AND LESS SECURE
Printing and mailing paper statements can cost banks between 55 cents to 75 cents per month per customer, according to a recent report from Javelin Strategy & Research. Online statements, of course, cost nearly nothing. But as motivated as financial institutions are to wean their customers off the pricey paper and despite more than a decade's worth of explosive growth in online banking, relatively few customers have budged.
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RANDOM NOTES Banks have known for a while that retail online banking customers are typically more profitable, but recent research suggests that this is true of small business customers, as well. Looking at companies with $100,000 to $10 million in annual sales, Barlow Research concludes that online banking customers are more likely to purchase additional products from their primary bank and interact with that bank through multiple channels. However, they are also more likely to experience an error. »more
