Know the Hurdles to Introducing this Technology
Bankers, vendors, and consultants are touting imaging as a way to cut costs. But many who have already boarded the imaging bandwagon complain the systems haven't lived up to advance billing.
Part of the performance gap can be attributed to inadequate training and the fears of some employees about new technology. Other problems may be the incompatibility of imaging equipment produced by different vendors and the difficulty of pinpointing the cost of an imaging project.
The following touches on some of the most significant problems posed by imaging systems.
* Integrating imaging systems made by different vendors.
There can be problems integrating both different image applications and between image applications and existing data processing systems.
One difficulty is that the standards committees -- which determine the language machines use to communicate -- have yet to agree on what an electronic reproduction of a document or check will look like. And the applications that are being developed don't necessarily communicate with each other.
If you have launched an imaging system, chances are that most of your current applications run on proprietary hardware. Your high-speed reader/sorter understands one operating system, your loan application system is based on another, and your workstations in the branches run on a third.
As a result, there is no standard foundation on which to build your image system. Hence, your applications don't communicate, and your system is less effective.
True integration requires open systems architecture, a technical framework that links components and allows independent systems to communicate and share information with each other. With open systems, you have the ability to move images from one application to another.
Compatibility also is a factor in telecommunications. Image systems require the transmission of massive amounts of data. Most current branch networks aren't up to the task.
If you want to distribute images of checks, signature cards, and other documents to your branches, you must have a telecommunications network with adequate capacity and compatible protocol.
* Exchanging check images between financial institutions.
This task is thus far beyond the capability of imaging systems. However, if check images could be passed back and forth among institutions, float -- the dollar value of cash balances created by the time lag in processing unpaid checks -- could be reduced.
If institutions can exchange images, ultimately, checks won't have to be moved from the bank at which they're first deposited. And that will cut down on lost checks.
* Lack of expertise in the banking industry.
This is a complicated technology, and generally all but the largest institutions lack adequate know-how.
Moreover, technology problems are only the beginning. Image systems frequently require significant changes in both the physical structure of a department and workflow arrangements.
Thus, what's needed is technological expertise coupled with check-processing and operations experience.
Even experts at an institution may have trouble keeping up with the rapid-fire pace of change in equipment and capabilities. Image technology is complex. You can't just buy software off the shelf, load it, and expect it to run.
As a result, many banks feel the need to turn to integrators, who can help them to determine and meet business needs with the lowest possible amount of financial risk.
* Cost, cost, cost.
In mulling a move to imaging, an institution faces the expense of replacing equipment with more powerful workstations, faster processors, and local area networks.
Most banks have a tremendous investment in their current hardware. That includes microfilm readers, terminals, mainframe computers, and personal computers. Thus, installation expenses often are overwhelming.
It's also easy to underestimate the cost of an imaging project. Most managers sell an imaging system to their bosses by emphasizing the staff reductions that are expected to result.
But the risk is that you may spend more than you anticipated for the technology, without seeing productivity gains. You also run the risk of purchasing capabilities you really don't need.
* Technological obsolescence.
Should you buy an imaging system now? Prices are declining, and tomorrow you may get more bang for your buck.
In addition, most current applications comprise a combination of first- and second-generation equipment and software. Consequently, technical requirements may be completely different in a year or two. Few institutions can readily afford to replace their equipment that frequently.
To maximize the effective life span of your system, you may want to go with the latest operating systems. But most such applications are unproven. You may have to work out the kinks onsite.
And by doing so, you may create a building whose bricks are loose and whose foundation is shaky.
* Disaster recovery.
In replacing people with machines, there's always a risk of malfunction. And that means hardware downtime.
In the old processing environment, if one of your proof machines broke down, you could double up on the others or go to a processing provider down the street. And, if absolutely necessary, some functions could be performed manually.
In an image-based environment, however, you don't have the same options. Because of the cost, most institutions are unable to justify the capacity required for full backup.
Even if the bank next door has an imaging system, chances are it looks nothing like yours. And in many cases, manual capabilities went out the door with the old equipment.
Imaging demands careful attention to disaster recovery. To remain operative despite technical difficulties, institutions must have redundant hardware and storage media or retain manual processing capabilities.
* Workflow modifications.
Whether in the back office or on the front lines, imaging revolutionizes the way people do things. Paper-intensive functions that require extensive employee involvement -- such as loan origination, demand deposit services, and customer service -- will likely be the areas with the film, and courier services with scanners, optical-disk storage, and image-capable workstations.
The downside is that machines will displace people in some areas. The upside is that some employees will have new career opportunities and a broader skills base.
And, just as important, you may be able to handle additional work volumes with the same number of employees.
* Document redesign.
While imaging innovators usually must retrain their staffs, in some cases, they must also retrain their customers.
The forms to which customers are accustomed -- on their checks, deposit tickets, and loan applications -- will have to be revamped. Documents must be uniform and image-ready for character-recognition technology to work.
This technology gives a reader/sorter the ability to read or recognize letters and numbers.
Count on some customer questions. Be prepared to explain requirements and procedures related to any new forms.
Is imaging all that it's touted to be? It can be, if all players in the financial services industry work in concert to turn the potential into reality. That includes banks, equipment manufacturers, software providers, and systems integrators. They must adapt the technology to their specific business needs.
Even when you've settled on a plan, remember: A prospective imaging system may not jump off the drawing board on schedule. And image experience in other industries has shown that you don't realize the full potential of the technology until after installation.
Right now, the financial services industry is pursuing imaging without a master plan. As one application is developed, vendors herald it as a panacea. And some institutions, under pressure to cut costs, jump in head first.
That myopic view inhibits the true value of imaging for the institution and reinforces proprietary attitudes among software and hardware developers. The only way to realize the true potential of imaging is to start with a long-term strategy, fitting each application and each piece of equipment into that plan.
PHOTO : JOE COTHRAN says the task of integrating different hardware systems can be a major source of problems.
Joe Cothran is a division vice president in charge of back-office services at Electronic Data Systems Corp. in Plano, Tex.
