In a move that could foreshadow a showdown between check imaging and the automated clearing house system, BB&T Corp. of Winston-Salem, N.C., has added an imaging system to its lockbox service.
The image feature, whose commercial availability was announced last week, still leaves actual settlement to paper checks, but BB&T considers it a step toward image-based or electronic settlement. In the meantime the images are passed around within the company to reduce processing time and provide electronic archives that customers can access online.
BB&T says imaging technology is more flexible than accounts receivable conversion, or ARC, which numerous banks use to convert paper checks into ACH payments. ARC was introduced in 2002 and has become one of the payments industry's most popular services; it has been forecast that more than a billion consumer checks will to be converted into electronic payments this year using ARC.
However, ARC has some limitations, the most important of which is that under current rules it cannot be used for business checks.
Image capture systems, in contrast, "can handle both corporate and consumer payments," said Joseph Watkins, a senior vice president at BB&T.
He said his company considered its lockbox volume too small to consider ARC, which prompted him to explore alternatives.
In business banking, most check imaging involves handing out check scanners to corporate customers, which use them to make deposits by transmitting electronic image files instead of carrying paper checks to a branch.
Wide use of imaging for check processing awaited the October implementation of the Check Clearing for the 21st Century Act, which lets banks settle transactions without actual checks. Now they can print out image replacement documents, which the law made legal substitutes, or forward the digital files to image exchange networks for settlement with participating banks.
Patricia Binns, a vice president with BB&T, said she timed the introduction of imaging to its lockbox service to coincide with the implementation of Check 21. The company began a pilot test in June.
The enhancement is running in BB&T's Charlotte lockbox facility. The company may add it to its Annapolis lockbox site soon.
Wausau Financial Systems Inc. of Mosinee, Wis., developed the lockbox feature for BB&T over six months. It is based on Wausau's ImageRPS technology, which is also used for ARC but until now could not handle wholesale transactions.
Charles Kelly, the technical product manager for wholesale remittance at Wausau Financial, said scanning corporate checks is a step forward from current ARC systems.
"It allows us to increase our business by expanding into a market space that did not exist before" for ImageRPS, he said.
Ms. Binns said banks that use ARC must have another processing system for business checks. "Our new imaging system is built on the capability of having one system to process any type" of transaction, she said.
Robert Hunt, a senior analyst at MasterCard International's TowerGroup Inc. in Needham, Mass., said BB&T was smart to add imaging to its lockbox service. An check image makes processing easier, he said.
Though many banks cannot yet settle transactions with images, that will change, he said.
