Three banks -- Bank of Boston, Keycorp, and Mellon -- expect to be the first to put into production a crucial piece of a long-awaited system from International Business Machines Corp., to capture check images, bank officials said.

The banks are now testing a function that converts the handwritten or machine-printed dollar amount on a check to computer data, and that automatically encodes the check.

Industry experts say that the function, called courtesy amount read, will eventually make it possible for banks to process about 60% of their checks without any manual intervention, significantly decreasing labor costs.

Test-Bank Attrition

This represents a significant milestone for the IBM system, which is running about two years behind its original schedule. Several of IBM's test banks dropped out of the original project, and the problems gave IBM's competitors, Unisys Corp., Banctec Inc., and AT&T, unit NCR Corp. a head start in getting their image-capture systems market.

Several banks, among them Comerica Inc., Signet Banking Corp., and Huntington Bancshares Inc., have been in production with image-capture systems for processing deposited checks for about a year.

Despite the delays, Bank of Boston officials say they never considered switching to a rival system.

|Long-Term Commitment'

"We wanted to help build the system," said Joanne E. Nuzzo, department executive, deposit-based services, at Bank of Boston. "We made a long-term commitment, and we wanted to see it through."

Some bankers are watching the progress of the IBM project before they decide whether to move to image-capture technology. And some believe that the IBM system will be better equipped to handle. high volumes of checks than competing systems.

Rapid Rollout Planned

The technology, which is designed to automate the sorting and encoding of checks by capturing and manipulating images of checks rather than the paper checks themselves, is expected to improve productivity in the labor-intensive area by as much as 40%.

Bank of Boston plans to put the image-capture system into production, with the courtesy amount read function, this October, in one or two branches processing about 50,000 items daily. The bank plans to roll the system out rapidly throughout its branches in early 1994, said Ms. Nuzzo.

Bank of Boston is the-first of the three banks to convert its conventional check-clearing operations to the latest release of IBM's Check Processing Control System, a software and hardware release that includes a camera in the sorter.

Bank of Boston processes about three million items a day through its Boston check- processing center, where the image system will be situated.

The bank employs about 400 people in the check-processing area.

Other Image Services

With the deployment of the image-processing system, some of these will be redeployed to personal computers entering data for the 40% of checks that cannot be processed automatically.

Bank of Boston is talking with several corporate customers about new services the bank could offer based on image-capture technology.

The bank could send a corporation images of the company's checks stored on an digital compact disk similar to those used for replaying music.

"Very high-volume check disbursers could load the check images into their own systems to improve their own customer service," said Ms. Nuzzo.

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