After years of plodding along, electronic check presentment is poised for explosive growth, according to attendees of a recent check processing conference.
The transaction rise is expected to be spurred by new check clearing house membership requirements and by the availability of a host of new software products.
Electronic presentment, commonly known as ECP, is the electronic transmission of check data in standard formats from the bank of first deposit to a payer bank. ECP works in conjunction with, not in place of, conventional check processing.
David Medeiros, a bank technology consultant with the Tower Group, Wellesley, Mass., predicted that in 1997 commercial banks will process well over four billion checks using ECP, up from about 250 million items in 1994.
Many of the attendees of the Bank Administration Institute's annual check processing conference echoed Mr. Medeiros' expectation of a precipitous rise in ECP volume.
The expectations were buoyed by announcements at the show, including the New York Clearing House Association's mandate that member banks become ECP- capable by July 31.
Also at the conference, which drew over 2,000 attendees, officials with the New York Clearing House's Electronic Check Clearing System and the Delaware-based Payments Solutions Network announced the formation of a partnership that will promote the growth of electronic file transmission.
Benefits of ECP include speedier collection of payments, which can affect up to $19 billion worth of interbank check float at any given time, according to Mr. Medeiros.
ECP also cuts losses from uncollectable checks, kiting, and fraud, experts said.
Using the float and fraud reduction benefits as a selling point, many software vendors are hawking their products as aggressively as ever, bankers said.
Three of the most prominent of these vendors are: J.D. Carreker & Associates Inc. of Dallas, Sterling Software Inc. of Norcross, Ga., and Servantis Systems Inc. of Dallas.
J.D. Carreker, which codeveloped its Checklinks software with several banks, has nearly 40 installations, including Citicorp, New York; Banc One Corp., Columbus, Ohio; BankAmerica Corp., San Francisco; and First Interstate Bancorp, Los Angeles.
The new Checklinks system will feature "item level recon," which claims to solve the problem of "double posting." This occurs when technical problems at the receiving end of check processing cause cash letters to be mistakenly posted twice - once when the electronic items come in and again when the actual paper checks arrive.
"It eliminates all the guesswork about whether you already have a paper item at the end of the day," said Hayden Watson, executive vice president with First Interstate, which is the beta site for the newest version of Checklinks.
"Its going to allow banks to be much more comfortable about getting into the business, especially on the receive side," Mr. Watson said.
Double posting is but one bug in early ECP systems. Others include inaccurate electronic files containing information that does not match the data on the actual check. Such a situation generates a burdensome reconcilement transaction.
As with any emerging technology, glitches are to be expected. However, they make it hard for bankers to draw clear-cut conclusions as to which product is superior: J.D. Carreker, Sterling, and Servantis are all enjoying brisk sales.
Ask a dozen bankers about the benefits of each system, and you are likely get as many different opinions on them.
"It's like a choice between Lexus, Infinity, or Mercedes-Benz,"said Stephen E. Kopiec, vice president with Chemical Bank's Float Management Services. "It depends on what your tastes are."
Chemical raised eyebrows recently when it purchased Sterling's ECP product. Chemical, along with Bankers Trust and BankAmerica, participated in the development of Carreker's Checklinks system.
"We weren't able to get (Checklinks) to work with our check processing control system," supplied by International Business Machines Corp., said Mr. Kopiec.
Mr. Kopiec said that Chemical's Texas subsidiary, Texas Commerce Bancshares, installed the Sterling package and is already posting check data received electronically.
Royce Brown, managing director with J.D. Carreker's software division, said Chemical had earlier versions of the Checklinks product and could have upgraded. "I honestly don't know what prompted them to go their own way," he said.
The first version of Checklinks was released in 1990, followed by Sterling's product in 1993. Servantis' weighed in with its ECP product last year.
Meanwhile, National Westminster Bancorp, Jersey City, Firstar Corp., Milwaukee, and European American Bank, New York, have followed Chemical's lead and are installing Sterling's package.
But, according to Alan Singer, senior vice president with ABN-Amro Bank, Chicago, that does not mean these banks will be more comfortable posting check data using Sterling's product.
"We will do a hell of a lot of testing," said Mr. Singer.
The Chicago bank's parent, ABN-Amro Holding of Holland, also owns European American Bank.
Ralph Libby, a vice president with Natwest, said the bank had been looking for an ECP system for about two years. It had intended to wait for the new version of Checklinks, but when Sterling announced its package was ready, the bank decided to install that product.
"We couldn't get a commitment from Carreker on when it was going to be finished," Mr. Libby said.
Meanwhile, Servantis also quietly developed a package that, according to bankers, works well.
"We wanted to make sure that it worked and that we could support it," said Arthur R. Doucette, a senior vice president with Servantis. "Servantis now has multiple installs and can easily support then all."
Servantis' latest customers are Marine Midland Banks Inc., Buffalo, and First Citizen's Bancshares, Raleigh, N.C.
They join Servantis' existing ECP customer base of Crestar Financial Corp., Richmond, Va.; First Union Corp., Charlotte, N.C.; NBD Bancorp, Detroit; and Old Kent Financial Corp., Grand Rapids, Mich.
Mr. Doucette said that Crestar, which was the test site for the Servantis software, known as Epoch, receives over 40,000 electronic items each night, and "that's all it can get."
