Bank of America is expected to sign a multimillion-dollar contract this week with International Business Machines Corp. to install and implement an imaging system for its check processing operations.
The decision by the lead subsidiary of San Francisco-based BankAmerica Corp. is a big win for IBM, said bank technology consultants.
Bank of America's motives, however, were called "unsurprising," considering that it processes more checks than any other bank in the country.
"For Bank of America, the internal cost reductions and additional business opportunities show that the business case is there for image technology;" said Charles McDonough, a bank technology consultant with Andersen Consulting. "I would be surprised if more banks were not making these decisions."
By eliminating most manual handling of checks, image capture technology is expected to reduce costs by 35% to 40% at banks that process large volumes of checks. Bank of America processes 15 million to 20 million checks per night.
The bank, which has been testing the proof-of-deposit application of the IBM check image technology, plans initially to deliver check images to commercial customers. It also will use the imaging system to repair checks that the item processing system initially rejects.
Eventually, the bank may use the IBM technology for image check statements and for archiving, though the bank's managers declined to give a timetable for either of these features.
"Our strategy is to work backward through the time-critical check processing functions," said Christopher Higgins, a Bank of America vice president and manager of paymemt services. "We've been pursuing the technology cautiously because our processing volume is so great."
For the past few years, Bank of America has taken small steps to prepare for image processing. An IBM imaging development partner since its merger with Security Pacific Corp. in 1991, Bank of America has consolidated its check processing operations in two California locations. It has outfitted these centers with IBM 3890 reader-sorters, and is now in the process of installing image cameras on the reader sorters.
"I believe they [Bank of America] have done about everything they can do in wringing out the efficiencies in traditional check processing," said Doug Halvorsen, manager of check marketing for IBM's document and check image solutions division. "To get more efficiencies, and to introduce new products, they had to move toward imaging." The possibility of introducing fee-based products and services is indeed a big reason Bank of America decided to roll out image processing.
"The bank is taking a decidedly less risky approach, rolling out image where it will help achieve additional market share," said Brenda Alek, vice president of Littlewood, Shain & Co., an Exton, Pa-based consultancy. "It may make other big banks with high processing volumes consider image in the same way. "It creates a new bar for everyone else in the industry, especially if these products succeed," she added.
