Paperless Technology Is Poised For 5-Year Boom

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Image replacement and ACH originations are likely to experience the most dynamic growth over the next five years in a sign that digital technology and pending check image legislation are starting to deliver on the long-awaited promise of reducing paper-based payments transactions, according to a survey by the Western Payments Alliance..

WesPay's survey of member banks, thrifts and credit unions found that 34% will accelerate plans to implement digital image technology in response to the expected passage by Congress of the Check Clearing for the 21st Century Act, which would allow banks-credit unions to transmit an electronic image of a check instead of shipping the original paper item.

The survey, which generated 109 responses from WesPay's 1,000 members, was conducted online between Aug. 20 and Sept. 5, with the results released at WesPay's Payments Symposium 2003 in San Francisco.

Survey Says

* In contrast to a year ago, just 26% of the institutions surveyed in 2003 said check volume would increase in the next 12 months, compared to 46% in 2002. Moreover, 35% said check volumes will fall either significantly or moderately in the next 12 months, compared to 29% in 2002.

* Financial executives are increasingly worried about payments fraud-by far the top risk issue. In 2003, 43% said that payments fraud was their top payments risk, compared to 39% in 2002. The next most important issue in 2003 was managing change in payments technology at 24%.

* A significant 55% say they are "highly concerned" about the increased risks associated with transactions over the Internet, via telephone and in converting paper checks into electronic payments. In addition, 39% said they are "somewhat concerned," and only 6% said they are "not concerned."

* Expense reduction remains the No. 1 payments issue facing financial institutions, with 43% ranking it their top priority. Customer-member retention was second, with 30%, followed by converting checks into electronic transactions, with 13%. All of those findings were virtually unchanged from WesPay's 2002 survey.

"The 2003 WesPay Survey shows that financial institutions are becoming convinced that the benefits of electronic payments are no longer a theoretical possibility, but rather a near-term business opportunity," said WesPay CEO Gerard F. Milano. "At the same time, concern about payments fraud has grown measurably, particularly with regard to emerging forms of electronic payments likely to deliver strategic benefits in the future."

Image Replacement Gains

As shown in the chart, payments professionals increasingly view image replacement as the next major area of growth. At the same time, ACH growth is likely to continue to be steady.

With the projected growth in ACH originations, payments professionals also say they plan to offer a full range of ACH options for both retail and business clients.

Among the other survey findings:

* Payments organizations again expect staffing levels to remain steady over the next year. In both 2002 and 2003, 73% said staffing levels in their organizations would stay the exactly same, while 21% said they expect staff to increase by 10% or less.

* Regional payments organizations remain a valuable resource, despite the ongoing consolidation among them. In 2003, 82% said that payments organizations would increase in importance-unchanged from 2003.

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