It wasn't until retail executives at Michigan National Bank were convinced that imaging technology would improve customers service that they decided to buy into the idea of image statements.

That's because the more frequently touted benefits of sending image statements -- namely reduced paper handling and lower postage bills -- were already facts of life for this $10.6 billion-asset bank. Some 80% of the bank's checking accounts customers receive truncated checks.

But the bank's retail executives loved the opportunity to be first in the region to offer image statements, where 10 reduced-size images of checks are put on a single 8 1/2-by-11-inch sheet of paper and mailed with each customer's monthly statement.

Customers Respond Well

"We're beginning to convert customers who have been used to returned checks," said Charles Kight, executive vice president in charge of Michigan National's retail banking and operations/information systems.

"They say storing the sheets instead of bulky checks is easier and that it should make income-tax time a bit less harrowing, especially when itemizing deductions.

More specifically, about 50% of new account holders are electing image statements over returned checks or truncated statements, said Jerry Bettens, Michigan National's project manager of image statements. Most of the others are choosing truncated statements.

About 15% of retail checking customers now receive image statements.

Mr. Kight said that he's looking to future used for the bank's image processing equipment to bring productivity and cost savings benefits.

Working Out the Bugs

"Passing the image among banks is another benefit we expect to reap when costs of compressing and communicating come down," he added.

As to any problems that had to be overcome, Mr. Bettens said, "We have had to work through bugs in the prereleased software coding, but that's expected."

The banks sees image statements as just the beginning of a new may of dealing with checks in general.

Said Mr. Kight, "I'm looking forward to the future when a customer can make a deposit to one of our branches and we'll send an image to the receiving bank."

He acknowledges that this will change the whole payments process, "affecting the time value of money."

Broader Impact Weighed

In other words, banks will have to address what happens to float when check images can be beamed among banks instantly.

"Longer term, there are possibilities, too, to limit such risks as check kiting and forgeries," said Mr. Kight.

But for now, Michigan National is content to start out with image statements.

The bank is using IBM imaging technology for its operations. The equipment consists of IBM HPTS Image System cameras and a IBM 3890 XP reader-sorter.

"Customer service and marketing benefits are important to Michigan National," said Doug Halverson, manager of document and check image processing at IBM. "The bank likes to have a new product to offer, to attract a new share of market, and to be perceived in the market as creative bankers."

The $10.6-billion-asset bank is the first in its region to offer image statements.

A Pioneering Effort

"In the banking community and among customers, we are known as innovators," said Mr. Bettens, "and our institutions has set customer service as a priority."

The first image statements at Michigan National were printed and used internally -- for its own employees -- last October, according to Mr. Kight.

"We announced the service in March and the first customers received them in April," he said.

Image statements have been marketed to existing customers through statement stuffers. "We used a brochure, which we also displayed in branches," noted Mr. Bettens.

Customers were given three choices for their statements -- image, returned checks, and truncated check -- each priced differently.

"There is something like 50 cents more for an image statement, but it's free if the consumer keeps a certain balance. We want the requirements to be nominal," Mr. Bettens said.

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