First Union Corp. has joined the Electronic Check Clearing House Organization, or Eccho, the nonprofit group of banks that sets the rules for the electronic presentment of checks.
The Charlotte, N.C.-based superregional became the 35th member of the four-year old organization. On Tuesday, Eccho officials announced the addition of another, New Jersey's First Fidelity Bancorp.
Anticipating significant growth of electronic presentment volume, First Union officials said the time was right to join the standards-setting organization in order to have a voice in the rules making process.
"It's somewhat self protective," said Eddie Link, a vice president who heads the product management and development unit at the $74 billion-asset bank. "We want to make sure we can be a major player in the realm of electronic clearing."
Mr. Link said information provided by banks doing electronic clearing revealed some "pretty significant cost saving," leading First Union to give development of the capability a higher priority.
The move by First Union, among others, reflects the growing interest banks have in electronic check presentment and, officials said, signals that the volume of checks cleared using this technology is posied to take off.
About one million items a day are exchanged via electronic presentment -- less than 0.5% of all checks written. But officials noted that well over 50 banks have now purchased or are developing electronic presentment software.
"We think that as it evolves over a period of time, we will see 60% or 70% of checks presented electronically," said Denny Carreker, Eccho's executive director.
The technology expedites the clearing of checks between paying and receiving banks by electronically forwarding information ahead of the paper items.
Banks realize the obvious benefits of this manner of check clearing. Proponents say electronic check presentment lowers operating costs and helps prevent check fraud.
Mr. Carreker noted that several banks in the Southeast, including NationsBank and Barnett, are expanding their electronic presentment operations. He said First Union's move positioned the bank "so they can exchange with those banks [who are] getting ready to go into production."
"We were really excited that First Union came in," Mr. Carreker said. "Obviously their size and geographic presence really reinforces the whole concept and value to other banks that are already in Eccho."
Mr. Carreker wears several hats when it comes to the emerging field. In addition to his position with Eccho, he is president of J.D. Carreker and Associates, a Dallas-based consulting and technology firm.
Mr. Carrker's firm also is a part owner of Delaware-based Payments Solution Network, a three-year-old data communications service that provides local and national connections for electronic check presentment.
In October, Visa U.S.A. agreed in principle to take an equity position in Payment Solutions Network. Sources said the deal will give Visa a majority position, but George McAulay, the firm's managing director, denied that, characterizing the ongoing negotiations with Visa as intricate. Visa could not be reached for comment.
Also, Payments Solution Network is negotiating with a number of banks to fill the remaining "slots" available for banks to purchase shares. The firm will limit the number to 12 banks, plus Visa.
The firm remarkets electronic check presentment software called Checklinks, which was developed by Advantis, a technology venture between International Business Machines Corp. and Sears, Roebuck and Co.
Payments Solution Network has a jump on other vendors with 45 sales to mostly large banks, including BankAmerica Corp. and Citicorp, said Wyn Lewis, managing director with Mr. Carreker's consulting firm.
First Union is evaluating a number of electronic presentment software products, including a package co-developed by Servantis Systems Inc. and Dominion Bancshares, which First Union acquired last year. Norcross, Ga.-based Servantis has had three sales of the package, called Epoch, which is in a test at Crestar Financial Corp., Richmond, Va.