A full three years after a prominent technology vendor announced that check imaging had "arrived," banks are finally acting as though they believe that's true.

According to data from two banking technology research firms, bank use of check imaging systems has grown from a trickle in 1993 to a veritable flood this year.

Experts said the popularity of the systems is a result of emerging evidence from early adopters that check imaging pays off - particularly when it is used for multiple applications.

According to recently released data from Mentis Corp., Raleigh, N.C., fewer than 100 banks used imaging systems in their check processing departments in 1993, and only 242 in 1994.

But 1995 was a breakout year, as the number of users rose to nearly 700. That figure is likely to grow to 1,353 by the end of this year, according to the Mentis data.

Survey data from Tower Group, Wellesley, Mass., seconds the notion.

Tower found that about 600 banks had installed check image systems in 1995, and about 1,350 are expected to have systems by the end of this year.

The data might seem strange, coming in the midst of an aggressive effort by banks to reduce their reliance on checks by encouraging consumers to conduct electronic transactions.

However, bankers said the investment in the systems is a nod to the fact that check processing will be a significant operations area for years to come.

Though the 6% annual growth in check volume seen in the early 1990s has slowed to about 2%, the number of checks processed by U.S. banks each year still exceeds 60 billion.

The early adopters of check imaging have shown the way for banks now purchasing the systems, experts said.

Barclays Bank PLC, Barnett Banks Inc., Comerica Inc., Huntington Bancshares, Mellon Bank Corp., Signet Banking Corp., and others have proved check imaging can improve operations and cut costs.

These banks report annual savings of between 20% and 40% on various check processing functions, and this news is leading other institutions to the systems.

The proof-of-deposit area - which in ordinary check processing operations is heavily laden with data entry personnel - benefits most from check imaging, bankers said.

But typically even the largest institutions need applications beyond proof-of-deposit to make multimillion-dollar investments in check imaging pay off.

According to Mentis, the number of users of imaging for proof-of-deposit applications rose 145% in 1995 to 412. But other applications also grew in popularity: banks using imaging technology for return/exception processing grew 160% to 346, and 444 banks used images to make statements, up from 192 in 1994.

Mentis expects the growth rate of imaging applications at banks with more than $1 billion in assets to continue increasing, at least through the end on 1997.

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