Check 21 Complications? Some Banks Are Stalled and Others Moving Ahead Undaunted; but Process Has to Change

Depending on who you talked to, Oct. 28 was either a day when, in the spirit of Seinfeld, nothing happened or, in the spirit of can-do-gooders everywhere, everything improved. True--no raging cascade of image files and electronic cash letters flooded the system in the days before goblins, witches, and Sponge Bob Square Pants-clad children took to the streets in search of free candy. Nor did image replacement documents arrive in volumes to rival paper checks. (Fiserv generated 2,500 IRDs for processing purposes in a well-publicized pilot involving the Atlanta Federal Reserve, Metavante, and Intrust Bank, Witchita. In the time since, volumes have ratcheted up for Fiserv to about 5,000 daily.) Meanwhile, at the BAI Retail Delivery Conference in Las Vegas, a few weeks later, some talk tended toward the skeptical, with more than a few consultants and vendors emphasizing barriers to mass image exchange rather than raising a glass to the triumph of a new era. But Oct. 28 couldn't be called just another day for the 3,500 active members of Endpoint Exchange--1,000 of which began truncating paper. Instead, it was the validation of their business model. Volumes continued to course through a system that has been live, in some capacity, since 2002. By early December, Endpoint had been processing a million image transactions daily and rising. "I've heard the talk citing roadblocks to Check 21 and receiving images, but we're doing it, so it's capable of being done," says Mark Craig, general manager of CheckClear LLC, Oklahoma City, which operates the Endpoint Exchange. Still, nobody is saying that this is a plug-and-play project. "The check touches a lot of business processes throughout the bank, from settlement to customer-service matters," says Carl Hugener, a partner with Diamond Cluster, a consulting firm based in Chicago. Because most banks are compartmentalized and "payment czars" are a relatively new phenomenon, banks lack an enterprise-wide perspective on their check processing function, Hugener notes. "So it will be harder for them to create a comprehensive map of business process." Early adopters know the deal Institutions that are knee deep in prep work probably know already that there may be a gap between specific solutions presented by vendors--say, image capture--and what else needs to be done to render a bank "image exchange ready." If anything, images demand stepwise deployment. Stefanie Sturgis-Griffin, senior vice-president of wholesale banking with Wells Fargo, San Francisco, says that the wholesale division's involvement with image predates activity elsewhere at Wells, which itself unfolded over six years. With wholesale payment operations, which took a decade to phase in, disbursements were targeted, one grouping at a time, for imaging in order to modernize day-two processes such as payment authorization. (For instance, at first, only positive-pay exception items were imaged, then large dollar volume checks; since 2002 all disbursement items are handled this way.) "Images let us review other information, such as a signature card, while looking over the payment," Sturgis-Griffin notes of the benefits of the new workflow. "It's become a very efficient process." Still, adjustments had to be made. "Viewing images on a gray scale monitor is materially different than handling paper, so it took a while to become comfortable with authorizing payments and conducting fraud screening in new ways," she says. In the last two years, with Check 21 pending and accounts receivable conversion (ARC) becoming prevalent, the bank has prepared itself to take further advantage of imaging's economies and has allowed corporate customers to take the processing some steps further, in effect creating an electronic link. With Wells Fargo's Desktop Deposit service, recently introduced, customers can scan and balance checks from their offices instead of delivering paper items to the bank. …