The ability to convert paper checks to electronic images for processing, transmission and presentment since the Check 21 Act went into effect in 2004 has created opportunities and headaches for banks large and small. For big banks, with reliable but inflexible core systems, the trick has been building new functionality on top of the systems, while younger banks have had the advantage of implementing whole new systems and driving greater efficiency—though volume did not always seem to justify the upfront expense.

Over the years these new electronic image technologies have advanced, and have steadily expanded their efficacy; now, what started as check-focused technology, is evolving into a more general electronic document management system. Take OnTrac, a solution jointly developed by Software Earnings and Wachovia Bank. Wachovia went live with the solution at the end of 2006 and has begun offering it to other financial institutions. So far five banks, from community banks to top-tier institutions are at some stage of deployment, though officials at Software Earnings and Wachovia declined to name them.

First and foremost OnTrac is a Web-based data-flow management and monitoring application that provides a centralized user interface for monitoring and managing a bank’s electronic data capture and exchange traffic. Back in 2005, when Wachovia was still just managing 100 electronic files per day (each file can contain tens of thousands of individual checks), officials realized simply converting checks to electronic files and sending them along their way was not going to be sufficient.

Serious controls needed to be put in place, so-called “way points” to check the progress of a check in the clearance and settlement process, to understand what still needed to occur and, critically, identify precisely where a check failed and send out alerts to the appropriate overseers. Without such incremental “way points” checks that fail cause a lot of difficult-to-sort-out finger pointing. “The name of the game is getting per unit costs down,” explains Andy Schmidt, research director of global payments at TowerGroup. “And that requires making things as seamless as possible. Did my scanner misread the document? Did someone mis-key something? There’s less time to adjudicate a problem.”

OnTrac addresses this problem by tracking, reporting and providing a vehicle to invoke value-added processes such as Image Quality Analysis (IQA), customer notification and duplicate file detection on all image file activity. This ensures that all expected and scheduled file transfers are executed successfully and processed appropriately based on unique pre-defined special instructions.

Wachovia could muddle along with an old-style tracking system when it handled 100 files a day, but that would be impossible now that volume has ramped up to 3,000 files per day. This increased check volume, coupled with the move to receive ever increasing volumes of image files of all kinds from corporate customers and bank branches and ATMs, significantly increases the risks associated with file management.

As Wachovia’s volume of checks has grown, so too has the volume for small institutions and that’s why Wachovia and Software Earnings are now pushing the OnTrac solution downstream to smaller institutions that, they say, could achieve cost savings and “better manage the complexity of the electronic exchange environment,” says Trent Fleming, svp for strategic market development at Software Earnings.

As the financial industry experiences the positive operational impacts of Check 21, and financial institutions begin to fully leverage their image processing solutions, an effective Web-based monitoring, tracking and decision tool will become a necessity to ensure operational accountability and integrity.

In other words, Check 21-inspired technology is not just for checks anymore. Banks are identifying other processes and procedures that OnTrac can streamline, says Fleming. “Some customers are focusing on monitoring and managing HR functions with the product, including employment applications. Others are tracking inbound image loan documents instead of letting the files sit on the desktop of a branch PC, which could be lost or compromised by a power outage.” (c) 2008 U.S. Banker and SourceMedia, Inc. All Rights Reserved.

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