Endpoint Exchange LLC of Oklahoma City, which was set up for image-based check clearing between client banks, is now offering to clear images of those drawn on other banks too.
It is accepting images of such checks and handing them off to its parent banking company, the $41.6 billion-asset Marshall & Ilsley Corp. of Milwaukee, which for now is clearing them by printing image replacement documents or arranging for the Federal Reserve and Fiserv Inc. to do so. Endpoint is also talking with other banks about clearing such checks.
The idea is to motivate members to shift away from paper-based check clearing - and to provide fee revenue for M&I.
"This provides a 100% truncation option," said Jeff Vetterick, the general manager of Endpoint Exchange, a unit of M&I's technology subsidiary Metavante Corp.
The service, which Endpoint started providing last month but announced last week, is based on one long provided by the of Dallas-based National Clearing House Association - which provides the settlement - and called National Clearing House Image Exchange Plus. M&I is also offering it as M&I National Plus.
Endpoint clients can use it for some or all of their checks drawn on nonmembers.
M&I Support Services Corp. acts as a collecting bank and handles the forward presentment on behalf of the bank of first deposit.
Russ Soderberg, a vice president in its payment services division, said Thursday that he hopes to be able to settle more checks with nonclients electronically as more banks begin to participate in image exchange systems. One way will be through the FedReceipt service the Fed is developing.
"We'll move more and more to image exchange as we go forward," Mr. Soderberg said.
M&I Bank is in discussions with other image exchange network operators, including Fiserv as well as Clearing House Payments Co. LLC of New York and Viewpointe Archive Services LLC of Charlotte, Mr. Soderberg said. It is also working with some trading-partner banks to establish direct connection for transmitting image files.
Mr. Soderberg said that 20 or 25 banks have agreed to send at least some of their imaged checks to M&I Bank for clearing through its new service, and "more are expressing interest on a weekly basis." So far the service has achieved one-day funds availability on 95% of the checks it received.
The business case for the service is strongest for remote rural banks that face high courier costs to clear paper checks and for banks that have many big checks being cleared through distant banks, he said.
"For some banks it will make all the sense in the world," Mr. Soderberg said. "Other banks will have a different business perspective."
Endpoint has about 5,000 members. Half are transmitting images across its network; the rest are installing and testing their systems.
Mr. Vetterick said the network carried about 6 million images in June. He said that a second Endpoint bank is getting ready to serve as a collecting bank, and that Endpoint wants to find more, to speed the connection to paying banks in other parts of the country. These collecting banks will charge a fee to the bank of first deposit.
Other collecting banks might choose to handle clearing only with banks within their own region, Mr. Vetterick said. Historically, he noted, large banks have provided collection services for small banks within their regions. With the new service, "faraway banks would pay you to take their images and clear them locally. It kind of reverses the traditional correspondent relationship."
Aaron McPherson, the research manager of payments at the research firm Financial Insights Inc. of Framingham, Mass., termed the new service "a modest step forward" and predicted that other check processors would introduce similar services.
"It seems like a natural next step in the evolution of image exchange," Mr. McPherson said. "It is another case where the smaller banks - the ones that are most likely to use M&I - are ahead of the game in check truncation."
