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Weekly UpdatesBanking, as we know it, has changed; and gone are the days of frequent trips to your local branch. Today, banking is giving business owners what they need most ... more time. More time to spend with customers. More time to focus on products and growth strategies. But how is banking providing more time for large and small businesses alike? Through innovation in services and technology designed to enhance efficiency and effectiveness.
THE FOUNDATION
Signed into law in October 2003 and enacted a year later, Check 21 set the foundation for the innovations that were brought to market. While Check 21 did not mandate that banks image-enable processing operations or exchange images with other banks, it instead opened the door to embracing this technology.
Check 21 allowed for the creation of substitute checks, which are the legal equivalent of paper checks. Substitute checks are created by printing electronic images of the original paper checks. By creating substitute checks, banks are able to remove paper checks from the collection and return processes. As such, Check 21 legislation is a marketplace enabler for innovations that result in efficiency and savings to clients.
TODAY'S TECHNOLOGY--REMOTE-DEPOSIT CAPTURE
Remote-deposit capture, which some consider to be one of the most significant banking innovations in decades, is a direct result of Check 21 legislation. Having taken the market by storm, remote-deposit capture allows businesses to utilize desktop scanning devices and software to capture images of checks at either an office or store location. Checks are then deposited by transmitting images to a bank instead of physically delivering the original paper items.
According to the American Bankers Association, 16 percent of banks currently offer its clients remote-deposit capture. In 2007, 33 percent of banks plan to add remote-deposit capture to its list of product offerings, and 9 percent plan to add this technology in either 2008 or later. It is evident that remote-deposit capture is a growing trend.
Additionally, more and more businesses have adopted remote-deposit capture because of its benefits. One of the major benefits of this technology is that it allows companies to make deposits into one single account at one bank, instead of into multiple accounts at multiple banks. Essentially, remote-deposit capture takes geography out of the equation when an organization selects a bank for check depository services. A company that uses remote deposit can conceivably consolidate all of its depository businesses with one bank, regardless of the proximity of that bank's branches to store or office locations.
Other benefits that have resulted from remote-deposit capture technology include:
* The elimination of time-consuming and costly trips to the bank, including courier fees.
* The simplification and streamlining of a company's cash management process.
* The ability to make a deposit from one's own office or store.
* Extended daily deposit windows.
* Faster check clearing by making deposits earlier in the day.
Remote deposit also can improve check-research and customer-service processes by providing online access to check images and deposit history. Along with stronger customer service is the ability to serve more customers quickly without adding personnel.
Nevertheless, remote-deposit capture is simply a starting point for the use of these emerging technologies. Image exchange, the clearing of images between financial institutions, is poised for dramatic growth throughout the remainder of 2007. With this growth, banks will introduce new products targeted at both small and large businesses, and clients can anticipate banks to aggressively market these solutions as they become available.
LOOKING TO THE FUTURE
While the adoption of image exchange has been slower than expected, it is gaining momentum. In fact, the number of image payments continues to increase and see month-over-month gains. According to ECCHO (Electronic Check Clearing House Organization), image-based clearing volume grew from 81.4 million to 505.2 million per month, or by 521 percent, for a 13-month period, which ended in February 2007. Since Check 21 was enacted into law, check payments totaling $8.8 trillion per year have already been moved from paper-based clearing processes to improved image-based processes, and the number of institutions participating in image-based clearing totals more than 6,000, with that number continuing to grow. Clearly, 2007 is shaping up as a year of explosive growth for image exchange.
Over the next 12 to 24 months, image exchange will become more prevalent in banks throughout the country, and its full potential will be evident. When it is realized, banking customers can expect to see their checks clearing faster. Companies also will be able to meet earlier deposit deadlines, which could lead to reduced float and improved funds availability, as more banks begin to embrace image-exchange technology.
The ramp up of image exchange also will improve the business case for banks to extend image capture to the branch teller line, ATMs, vault services and lockbox, providing a faster, more efficient and less costly way of getting checks into the payment clearing system.
GOING MAINSTREAM
While there is already some activity in some of these areas, we can expect that image capture at the earliest point of presentment will become mainstream in the not-to-distant future.
Additionally, banks are making increasing use of image technologies to improve customer service in the back office. A number of banks have begun using images to improve the check-return process by retrieving images from their image archive rather than reprocessing the original paper checks. This provides a faster and more efficient check-return process, which is important to reducing check fraud. Innovations like these are likely to accelerate over the coming years.
Also, remote-deposit capture is now becoming more attractive to the retailer market since the introduction of back-office conversion in March 2007. Back-office conversion, or BOC, is a payment option that retailers can utilize to convert checks to electronic debits. This process allows merchants to scan customer checks in large quantities and process them through the automated clearing house (ACH) network. Some believe that BOC will take business away from remote-check deposit. Instead, BOC and image-check clearing should be viewed as two distinct clearing channels under the remote-deposit capture umbrella. Once a company scans the check, it then has the option to either convert the item to an ACH debit or have it cleared as a check under image exchange. Once again, remote-deposit capture is opening the door to new technological innovations.
In just a little more than 2-1/2 years, the way in which we all bank has significantly changed. Emerging technologies, convenience and efficiency have come to the forefront and are now the cornerstone for the business banking industry. Today, banks across the country are developing technologies and services that deliver more value for businesses of all sizes. Hence, business owners can expect to find more inspired growth, enhancements and capabilities that go beyond anything Check 21 originally intended.
Brian Nerland is president of KeyBank Alaska. Nerland may be reached at 564-0291 or Brian_G_Nerland@KeyBank.com.
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