Now that numerous banks have successfully implemented check imaging systems, the question becomes: What shall we do with them?
Rather than finding contentment in the delivery of image statements and basic image research products, many banks are seeking ways to improve customer service, gain even greater operational benefits, and open doors to new fee-income opportunities. Similarly, banks contemplating the implementation of a check imaging system are looking for additional ways of justifying such an investment. Though there are numerous issues to be considered in this context, here are some of the most important.
Cross-platform image integration. Today, all institutions should be pursuing a strategy of imaging for all documents. Daily reports, signature cards, checks, and loan documents, to name a few, can all be stored and retrieved electronically.
Institutions that find ways of integrating the storage and retrieval of all documents will be much better suited to quickly respond to both external and internal customer needs.
One example of this integration would be viewing a checking account report that was transferred to a microfiche-replacing report archival system and then highlighting a particular item and bringing its image to the screen.
Image-enabling of core accounting systems. Perhaps the most important of all image integration strategies is the enhancement of core-accounting systems with images.
Far from providing a separate method of viewing an image, an integrated system will add images to other information - balances, transaction history, account type - available from the traditional inquiry screens. This will be true of loan documents, check images, signature cards, and statement pages, for example.
By providing access to images through traditional screens that users are familiar with, vendors add significant value to their existing applications, and minimize learning curves as images are introduced into the banking environment.
These capabilities will come about in one of two ways. Some application vendors have chosen to develop their own imaging systems, placing them in an excellent position to integrate their core systems with the images of checks and other documents.
Others have taken the path of closely aligning with a particular imaging vendor to add similar functionality to their products. Each path has its pitfalls, but we expect banks to be able to successfully implement systems of either type, providing that a bank does an appropriate analysis of its needs.
Imaging in the checkless society What about imaging in terms of efforts to eliminate checks as a means of payment? Clearly, Federal Reserve and private bank initiatives are directed toward truncation of paper, and electronic forward and return item presentment. In addition, electronic payment alternatives - ranging from bill payment to debit cards to financial electronic data interchange - are gaining in popularity.
However, these trends must be put in proper perspective. Last year, approximately 60 billion checks were processed in this country. Of those, only about 18 billion - less than a third - were personal checks.
Thus, if all consumers are convinced to use debit cards and electronic bill payment for all their transactions, the banking industry still has to contend with over 40 billion checks.
The key to significant reductions in check transactions is to provide convenient, inexpensive ways for businesses to make and receive payments. Banks will have to take the lead in developing and promoting these new transaction types.
Today, automated clearing house origination offers an excellent solution to businesses writing large numbers of payroll checks or other predetermined payments. Financial electronic data interchange and other "electronic commerce" methods are still in development stages, but offer great promise for banks and their customers.
The key variable is how long it takes for such methods to become so prevalent that the number of checks being issued begins to decline.
Today, five to 10 years appears an optimistic time frame, and 15 to 20 years is not out of the question. However, the slope, as we say, is quite slippery, and much of the progress is in the hands of bankers. Effective promotion of current electronic transaction capabilities, and development and promotion of new ones, are the keys to the checkless society.
Meanwhile, check imaging systems offer definable paybacks, and provide real operational and marketing benefits. Even banks that successfully market truncation programs can find real benefits in the research and proof/capture areas from check imaging systems.
Those that choose to offer image statements can position themselves as market leaders by offering improved customer products and services.
Further, images provide the ability to implement new products, and enhance existing product offerings. Banks can offer dial-in access to high- volume accounts, so that all checks presented for payment can be reviewed, or exceptions to positive pay instructions can be reviewed. Delivery of statements via phone-line or CD-ROM enhances customer service by allowing the business to research account information at will on a PC.
Though the trend is toward not charging for basic image services like statements and single-item research, this is done to ensure high acceptance rates, which in turn ensures sufficient operational benefits. However, value-added services, like ones mentioned above, are clearly beneficial to customers and should be fee-income based products.
In sum, check imaging is not contradictory to truncation and electronic payments, it is a complementary. While working toward the check-less society, check imaging offers banks significant opportunities to intercept paper items and process them much more efficiently.
When you consider that labor typically represents more than 40% of all item processing costs, systems that will dramatically reduce labor and other overhead costs must be carefully considered. This is particularly true when the same system will improve customer service and provide the opportunity to strengthen existing relationships and gain new ones.
Mr. Fleming is president of Technology Advisory Services Inc., Memphis.