At a time when banks are banding together to back next-generation technologies like Internet payments and electronic billing, Bank of America, Chase Manhattan Bank, and International Business Machines Corp. are setting their sights on reviving check imaging, a relative old-timer on the bank technology scene.
The banks announced Wednesday that they had signed an agreement with IBM to form a company that will create digital images of checks that could be shared online among banks then sent to consumers. This service, the companies said, will put the industry in position to reduce check processing costs by as much as 30%.
The founders have invested undisclosed amounts in the company, called Viewpointe Archive Services, and said they have room for another three or four equity investors. They hope to begin signing bank customers in the next two to three weeks, and eventually to attract a majority of the nation's 50 biggest banks.
The sudden push is reminiscent of the early 1990s, when Internet banking was still a glimmer of a concept and check imaging enjoyed a reputation as one of the industry's hottest technologies. The complexity and expense of imaging, however, severely slowed adoption; only in recent years have big banks started getting into it in a big way.
Part of the reason for the renewed interest may be the unexpected yet steady increase in the volume of paper checks. Even with the rise of Internet banking and electronic bill payment, the number of paper checks written in the United States continues to grow steadily by 2% a year.
"Banks have to move paper back and forth, which is very time-consuming and very costly," said William H. Hoefling, executive vice president at Chase Manhattan. "The electronic transfer of images will dramatically decrease the cost of check processing."
Chase Manhattan is one of the few banks to have swallowed the huge investment in check imaging, and now its technology and intellectual capital are the underpinnings of Viewpointe. Three years ago Chase Manhattan installed a digital check archive using technology from IBM, and Mr. Hoefling said this project has brought about significant savings in time and money. During the past year Chase Manhattan began exploring the possibility expanding its operations to form a collective archive.
Meanwhile, Bank of America has spent the past year looking into building its own in-house digital check archive. From the beginning, the bank was interested in the possibility of building a collective archive with Chase Manhattan, said James D. Dixon, BankofAmerica.com executive.
"Once we talked to each other, there was a mutual interest to see if we could put this together," Mr. Dixon said. "We saw there would be significant advantages in moving together, rather than doing it stand-alone."
Viewpointe's management team, including the chief executive officer, will be culled from its founding members and is expected to be in place by yearend. So far the Houston-based company has about 30 employees.
Viewpointe member banks will capture digital images of checks as they are processed and cleared - as many as 100 million a day - and transmit these images to one of several archiving centers to be managed by IBM. These centers will transmit the check images electronically to the paying banks, thereby allowing participating institutions to rapidly exchange checks with one another.
No pricing scheme has been announced.
Steve Ledford, executive vice president of the Atlanta-based research firm Global Concepts, said that "a lot of big banks had trouble rationalizing an investment in check imaging."
"Now," he said, "I can't think of single big bank not actively pursuing technology for its future image processing."
The biggest question mark in Viewpoint's success, Mr. Ledford said, is whether enough banks will want to join the archive to make it effective.
Robert Hunt, a senior analyst with TowerGroup of Newton, Mass., predicted that larger banks will be quick to join the company, though consumers may lag in their adoption.
"You still have a lot of resistance to the non-return of paper checks by consumers," he said.
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