Check 21: One Year Later – A Case Study
Check 21 was going to change the world as we bankers know it. That may still be the case but, as so often happens, change happens slowly. According to the Fed, fewer than 150 financial institutions nationwide have signed up with the Federal Reserve to exchange images, and that’s on the transit side of the business. Far fewer are yet accepting check images as their inclearing work.
Kirk Burnham, vice president and chief technology officer at $160 million-asset-size North Brookfield Savings Bank, is surprised that bankers aren’t adapting faster. His bank began sending its outgoing image cash letter to the Federal Reserve Bank in September.
“Day one, we cut our transit processing costs in half,” says Burnham. “We share an archive of all transit images between our four branches, and have eliminated the costs associated with developing microfilm. If a $160 million, four-branch savings bank in North Brookfield can do it, anybody can.”
North Brookfield had been encoding its outgoing items and scanning them into a Bell & Howell image system for research. Now using COCC of Avon, Conn., the scanning and encoding processes are combined, reducing the labor costs associated with check processing. Images are collected and encoded automatically at COCC’s processing center as soon as they run through the bank’s capture devices.
“At the close of business, we prove the outgoing image cash letter and transmit to the Fed,” says Burnham. “Our cash letters reach the Fed within minutes of transmission. We get the earliest processing window regardless of the time we close.”
Because North Brookfield transmits images instead of moving physical items, courier, weather, and traffic concerns are dramatically reduced. Another important reduction is in the area of fraud.
Burnham says the speed of the image exchange process works against criminals. “Paper is much easier to forge and harder to verify,” says Burnham. “Frankly, more criminals are working that angle than any other. Images should reduce overall fraud for our customers.”
He adds that the overall process created minor changes to workflow, but nothing significant. “I went on vacation during the testing process, and my staff picked up the process and ran with it,” says Burnham. The biggest change? “Adjusting to the fact that all of the banks in our area are now getting substitute checks because they’re not image enabled yet.”
At this early stage of image exchange, most of the outgoing items are printed as substitute checks. When the Federal Reserve, Endpoint Exchange and other image players release inclearing image capabilities, the number of substitute checks will shrink, and bank savings will increase.
Banks pursuing image capture and exchange should look carefully at the image-ability of their check and non-check items. “The standard for image-ready documents is much higher in the image exchange world than it is when the bank is only providing image statements,” says Burnham. “Checks that would be fine for image statements don’t necessarily meet the standards of image exchange.”
Among the items that North Brookfield reviewed were all teller-transaction forms, such as deposit and payment tickets. The bank is currently redesigning these forms so the efficiencies of the automated CAR/LAR (Courtesy Amount Recognition/Legal Amount Recognition) process can be fully realized, Burnham said.
With the new forms, the bank expects to eliminate all courier runs – even between branches – by the end of the year. This is because image forms will be accessible electronically throughout the branch network, and paper archiving will become a thing of the past.
Burnham says a big factor in his ability to implement image exchange is having strong technical support behind the scenes. “COCC did the heavy lifting here,” he says. “They developed a full financial analysis for the bank, researched the vendors, installed the solutions and figured out the mechanics of implementation.” The new system is expected to pay back the bank’s investment within one year.
Looking ahead, North Brookfield is already preparing for the next image innovation – an ATM capable of scanning deposited checks. Burnham is looking forward to collecting those items faster and reducing the number of attempted frauds.
Information provided by COCC and North Brookfield Savings Bank.