The advent of check image technology has enabled one New Jersey community bank to bring its check processing operations in-house after outsourcing them for more than a decade.

New Jersey Savings Bank, based in Somerville, N.J., announced last week that it will join the growing ranks of community financial institutions that have installed check image systems.

Such systems, which are currently available through a number of hardware vendors, including Banctec Inc., International Business Machines Corp., NCR Corp., and Unisys Corp., turn paper checks into digitized images that are easier and cheaper to process.

New Jersey Savings executives indicated that the cost savings associated with image processing convinced them to end their longtime relationship with check processing service bureau providers.

"We've outsourced the check processing operation for as long as I can remember," said Robert J. DiTota, senior vice president in operations at the $470 million-asset bank.

"After some investigation, we believe now that it will be cheaper for us to bring the technology in-house and do the processing ourselves."

Though the bank will not finish installing the image system until the first quarter, Mr. DiTota said that conservative estimates place his annual operational cost savings at over $100,000.

The lion's share of these savings will come from the check image statement module of the check processing system, which is composed of hardware from NCR Corp., Dayton, Ohio, and software from Document Solutions Corp.. Birmingham, Ala.

Trimming Costs

Check image statements contain the same information as regular monthly checking statements. But while regular statements contain canceled checks, image statements contain miniaturized pictures of those items.

Since these pictures can be grouped eight or 12 to a sheet of paper, mailing costs are greatly reduced.

New Jersey Savings currently spends an average of about $1.18 to send its regular check statements. It believes that by using the image statement system in conjunction with postal bar-coding equipment, it can get that average below 30 cents per statement.

The bank has about 15,000 demand deposit customers, so the annual savings on postal costs alone will likely climb into the hundreds of thousands of dollars.

Rapid Payoff Seen

In addition, Mr. DiTota said he believes that the image system will allow the bank to reduce by 25% the number of employees who handle statement rendering. The remaining staff members can be redeployed in customer service roles.

Of course, bringing the check processing operation in-house is not without costs. In addition to the hardware and software expenses, the bank must hire and train employees to handle the new work.

But, since the imaging system streamlines a lot of check processing jobs, staffing levels at New Jersey Savings are not expected to rise significantly.

For instance, the bank believes it will only have to add two or three employees to handle the 7,000 to 8,000 checks that flow through the proof area each day.

Taking all these expenses into account, the bank believes that the system will pay for itself completely in two years.

Storing Images

In addition to check processing equipment, the bank has purchased an optical disk "juke-box," which will store the check images. Since the stored images will be accessible to networked personal computers, customer service representatives will be able to Answer customer inquiries about canceled checks in seconds.

Further down the road, the bank is considering putting the images to other uses, such as signature verification at the teller and platform stations.

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