With a pilot test of ATM-based check-imaging, Bank One Corp. has become the first institution to use the technology to automate deposit-taking all the way to the back office.
For now, the test is limited to two ATMs, which accept cash and checks without using an envelope, image checks instantly, show images on-screen and on receipt, and send images to the back office for immediate processing.
The Chicago company, one of the nation’s five largest ATM deployers, says it will have such machines installed in branches in Kentucky and Indiana, 10 in all, within two months and that if the pilot succeeds it will roll them out in volume by midyear 2003.
“We expect to be able to lower our costs with this technology,” said Dean Kontul, Bank One’s ATM network manager, said in an interview. Costs would dip more if the Check Clearing for the 21st Century Act becomes law, permitting full automation of the processing, he said.
Bank One and its ATM vendor, NCR Corp. of Dayton, Ohio, say that the deployment is the first to combine check imaging capabilities with electronic back-office processing. At least one other major bank, Wells Fargo & Co., has used the technology, however — in July the San Francisco company concluded a five-month trial of image-enabled ATMs, installing eight Diebold Inc. machines in Northern California.
“We were the first bank to test this technology in the field,” said Jonathan Velline, Wells Fargo’s senior vice president for ATM banking. Customers took to the concept and the images boosted confidence in making deposits at ATMs, he said. “We had very positive results.”
Mr. Velline said Wells is evaluating those results with the long-term goal of installing the image-enabled machines throughout its network and linking the units to the back-room processing centers, as Bank One has done.
Mr. Kontul said Bank One had previously tested a pair of ATMs with imaging features that were not connected to the back office.
Using check-imaging technology, customers can deposit checks or cash into an ATM without an envelope. The cash is automatically counted, while checks are scanned; an image of the check and the exact value of cash deposits are then printed on the statement.
Mr. Kontul said many customers like this feature because it provides a more reliable receipt of their deposit, though this program is not explicitly aimed at getting more customers to make deposits through the machines.
By linking the devices to the back office, Bank One can begin processing the check deposits using the image files before the actual checks are retrieved from them. Since the machines store cash deposits in the safe but put the checks in a separate compartment, the money can be retrieved by standard couriers rather than expensive armored car services.
Because banking regulations require that two people be present when deposit envelopes are opened, the absence of envelopes will trim back-office costs. Using an electronic version of the checks also eliminates the need to input deposit data manually and allows more of the actual processing of data to happen automatically, shaving expenses further still.
Finally, having images of the checks available immediately lets the bank better monitor deposits and evaluate potentially fraudulent transactions instead of waiting for the paper checks to be delivered to the processing center. Doing away with envelopes altogether will also put an end to the common empty-envelope deposit scam.
“This offers a huge amount of savings,” said Phil Kasper, an assistant vice president of marketing for the Americas region at NCR’s ATM division. Though Bank One would not say how much it expects to save through this technology, Mr. Kasper said that courier costs could halved, while the labor costs involved in processing check deposits in the back office could be slashed as much as 70%.
“This is basically processing the entire check amount with zero human interaction, and that’s a huge labor reduction,” he said.
These costs, especially courier fees, would be further reduced if the legislation formerly known as the Check Truncation Act, now commonly known as Check-21, becomes law. It would allow the electronic image to be used as the legal transaction document and would eliminate the need to retrieve the checks daily. Mr. Kasper said that companies using the image-enabled ATMs would not have to make any major changes to gain immediate benefits.
Alanna Kellogg, an independent banking consultant based in St. Louis, agreed that the technology will make the processing of deposits cheaper.
“This electronifies a transaction so it doesn’t have to be handled by people as many times,” she said. On top of the immediate cost reductions, she said, the ability to better scan for fraud could have an even bigger impact down the road.
But Ms. Kellogg pointed out that the overall rate for deposits through ATMs remains low —- industrywide fewer than 15% of deposit transactions are done through ATMs, she estimated — and said check imaging may not necessarily affect that figure.
