Toasters hold a quaint place in the distance past of perks banks offered to make things easier for their customers. At a growing number of small banks, it's a toaster-sized device that's paving the way toward a future when paper itself will be a relic.
"The scanner's about the size of a toaster, maybe just a little longer," says John Talbot, first vp at the $150 million-asset Seneca Falls Savings Bank in upstate New York. He's talking about the only piece of equipment his bank needs to run image-capture software, which has allowed it become "full FedFoward," the Federal Reserve's term for fully imaged delivery of cash letters from bank branches to local Fed locations.
This step is allowing institutions, such as Seneca Falls, to eliminate in-person trips to Federal Reserve locations. Since making the move in late April, Seneca has enjoyed the benefits of reduced travel time and cost, as well as immediate credit from the Fed, rather than the traditional wait that was often more than a business day.
"Another plus is it helps us with our reconciliation process," Talbot says. "When we switched over to the full FedForward, the balances are done during the day, and by the time the bank closes, we know if there has been any listing error."
The move is a result of Check 21 legislation, now a fully minted piece of law that allows images to flow freely, creating vast savings in time and travel and opening up opportunities for new lines of business and extended hours for institutions of all sizes. But these benefits are a difficult destination for smaller banks to reach, because of the complex technology involved. By jobbing out the core and item-processing work, which Seneca has done with Open Solutions, the bank is able to avoid running the sort of large technology operation it doesn't have the resources to operate on its own. All it needs is the toaster-sized scanners.
"For a bank our size, this eliminates an investment in a lot of expensive hardware, and hiring of more technically oriented staff," Talbot says, adding that full imaging was introduced with a minimal amount of training, so the bank's employees were able to use it immediately. "At a small bank, there's a lot of people who wear a lot of hats."
Open Solutions, which aims its product at banks of up to $2 billion in assets, leverages existing Fed technology for its processing product, which eliminates the need to receive paper items from the Fed. The firm pulls down the images from the Fed archive and into its own national archive. Then the Fed sends them directly to the financial institutions. "So the money is available earlier in the day," says Marcel King, vp of the strategic solutions group at Open Solutions.
Remote capture also removes courier costs, both in terms of paying for the service and in terms of later cut-off times for transactions. "Banks would traditionally have a 3 [p.m.] or 4 p.m. cutoff because of the courier pickups, so the late deposits wouldn't get processed until the following day," King says, noting that one of his clients, Boiling Springs National, expects to save $120,000 in courier fees this year.
In the case of Connecticut-based First National Bank, courier runs were costing at least two working hours for each branch run, even though its local Fed office was relatively close to the $170 million-institution's main offices and four branches. Becoming full FedForward has allowed it to keep this work inside the branches. It's also allowed the institution to receive about 99 percent of its cash letters by the following day, as opposed to about 90 percent before the rollout. "Our records are also instantaneous," says Carrie LeBlanc, vp of operations for First National. "We're able to get photocopies of records for our customers when they come into the bank and are standing in front of a teller. It's incredible how quickly we're able to get information for the customers."
When Check 21 became law late last year, the promise was that it would pave the way for imaging to be used as a springboard to a variety of efficiencies by using technology that was previously available, but untenable because of the prior non-image standard. Many of the community banks outsourcing imaging are finding these tangential impacts to be just as beneficial as the ability to transmit checks without paper.
At Simsbury Bank, also based in Connecticut, operations officer Barbara Wallace says submitting fully imaged items to the Fed has allowed the institution to cut down on research time by 85 percent, in addition to allowing it to adopt a number of new technology-driven features. "It's opened up the world to e-mail statements through our Internet-banking program," Wallace says, noting particular improvements in research. "We have the images at our fingertips. We don't have to go back and get checks. We have the trace numbers and that's all you need. We don't need the hard copy anymore."
