Bank South Corp. has bought a PC-based imaging system for its wholesale lockbox service from Imagescan Inc., a technology firm based in Lanham, Md.
The imaging system, valued at $400,000, is by as much as 300%.
The deal with Bank South, an Atlanta-based company with $6.6 billion of assets and 138 branches, is Imagescan's third this year. The firm has already installed the system at Bank of Tokyo's Jersey City office and at Huntington Bancshares, Columbus, Ohio.
Installation at Bank South is expected to be completed in September.
Wholesale lockbox is a cash management service offered by banks to corporate customers to speed up the deposit of check payments.
Patricia Webb, director of cash management at Bank South, said that, although the bank has been in the lockbox business since the 1950s, it did not treat it as "a core product" until recently.
Ms. Webb said Bank South, which handles about 100,000 items monthly for its 100 corporate customers, has operated the service as a back-office, laborintensive "manual shop."
The new imaged-based system, she said, would help the bank attract new customers. "We will be going after new lockbox markets," she said. "We think there are still untapped numbers of small and medium-sized companies that haven't looked at the lockbox business before."
Still, some bankers say that lockbox is a mature business that will eventually decline as paper checks are replaced by electronic payment systems.
"Check growth has pretty much leveled off," said Richard Burke, senior vice president at CoreStates Financial Corp., which is among the largest suppliers of wholesale lockbox services. "There is a stable demand."
He said CoreStates' long-term strategy may be to grow its lockbox business by taking market share from other banks abandoning the high-volume, low-profit service.
But many banks continue to offer the service in order to have a full range of cash management services for their corporate customers.
Ms. Webb sees a brighter future for the business.
"We don't think lockboxes are declining," she said. "A lot of people think that the ACH and electronic data interchange will minimize lockboxes, but we don't think that will take place in the next five years."
She added that the prospects for lockbox services will change over time as the business "slowly modifies itself to electronics."
The imaging system at Bank South will be Imagescan's eighth installation. The PC-based system is also used by Crestar Financial Corp., Richmond, Va.; First Tennessee Bank, Memphis; and Union Bank, San Francisco.
Tom Scott, president of Imagescan, estimated that only a small percentage of the roughly 200 banks in the lockbox business use imaging technology extensively.
"At this point, we've installed three this year, and it's rapidly growing," Mr. Scott said. "It's not a huge market, but it is an excellent application for imaging."
Mr. Scott said that Bank South -- through its new network of International Business Machines 486 PCs, laser printers, and optical disc drives integrated with the Unisys DP 500 check transport -- will speed up productivity as much as 300%.
"It is a cleaner, much more controlled process rather than having them walk around with a bundle of checks," Mr. Scott said.
Under the new system, check images from the batch will be captured and encoded, then processors can immediately key on-line from the check image. The system allows for multiple image copies, phone notification, and image archiving for up to a month.
