A group of Texas banks announced the start-up of their long-anticipated electronic check presentment system this month through Payments Solutions Network Inc. in Delaware.
PSN, formed in January, is owned by eight banks that are looking to grow in electronic check clearing.
"Currently we have 15 more banks that have signed contracts," said Wyn Lewis, managing director of the consulting and technology firm J.D. Carreker & Associates, Dallas. "All the banks in one state have said, let's work together."
PSN is owned by NationsBank Corp., BankAmerica Corp., Bank of Boston Corp., Barnett Banks Inc., Boatmens Bankshares, First Interstate Bancorp, First Tennessee National Corp., and J.D. Carreker.
The four banks using the ECP exchange are Bane One-Texas, First Interstate of Texas, Frost National Bank, and NationsBank of Texas. Bank of. America-Texas plans on joining the exchange within six months.
Electronic check presentment is a growing field. The technology expedites the clearing of checks between paying and receiving banks by electronically forwarding the information on the magnetic ink Character recognition line on paper checks. Proponents of the technology say its benefits include reduced operating costs and better customer service.
But mainly it helps banks reduce the risk of fraud by quickly detecting checks drawn on insufficient funds, said Sydney Smith Hicks, senior vice president of NationsBank and chairwoman of PSN.
"ECP accelerates the return item process," agreed Mr. Lewis. "TherefOre, it reduces the bank industry's window of risk. Playing the float game has lost its innocence. That window of risk is being exploited."
Slow to Get 0ffthe Ground
Though the move toward ECP began in recent years, its implementation has been rather slow. Denny Carreker, president of the consulting firm, said PSN was conceived three years ago, but added that it has taken that long for banks to become "receive capable."
"On the bank deposit side, sending messages is not a problem," Mr. Carreker said. "On the other end you have that receipt function, which is a lot more complicated."
Mr. Carreker added that because of the banking industry's recent moves toward consolidation, limited amounts of resources have been devoted to this area of operations.
Bane One, First Interstate, and Frost will initially do 20% of their ECP through CheckLinks software, which was developed by J.D. Carreker & Associates, Bankers Trust, BankAmerica Corp., and Chemical Banking Corp.
CheckLinks allows the receiving bank to send check information to the paying bank electronically. Mr. Lewis of J.D. Carreker said that about-one million ECP items are exchanged each night. "Many bankers will be surprised by that."