Aiming to drive adoption of electronic check imaging within the banking industry, Viewpointe Archive Services LLC plans to use the Small Value Payments Co. network for transmitting information to financial institutions that are not affiliated with the storage consortium.
The newly announced alliance opens the door for banks to settle checks using digital images instead of physically moving the paper checks from one location to another.
The Viewpointe archive association, which is based in Charlotte, has nine member-banks and says its storage system holds images of about 40% of the checks written in the United States. Because the files are all stored within a single database, members can settle transactions by exchanging checks electronically among themselves when needed.
Current laws require all banks to send the paper checks for final settlement. But the Check Clearing for the 21st Century Act, which may be approved by Congress this year, will let them settle the transactions using only the digital version of the check.
There is no mechanism allowing the Viewpointe banks to send check images to nonmember institutions, however. That's where the SVPCo network comes into play.
SVPCo is deploying an open national network for transmitting digital check images between institutions. Also a consortium, the New York-based company is owned by 22 banks that want to promote the electronification of the check clearing process, and eight of them have committed to using the SVPCo network once it is in place. The system is expected to be up and running by the first quarter of next year, and more of the participating institutions are likely to adopt the service once it is available.
Hank Farrar, SVPCo's president, said that many banks are using imaging internally, but that the technology's bigger impact will be felt once the data can be exchanged between institutions. "There needs to be a common network and a common infrastructure that banks can plug into," he said. "One way or another, we must be able to move the images to the place where they will ultimately reside."
Viewpointe chief executive John Lettko said establishing this type of network advances check imaging. He estimated that 90% of U.S. banks are either using check imaging now or planning to do so; the next step in the format's evolution is exchanging images between banks, and fewer of them have moved to that level. "Just because a bank is using image technology today does not mean they are ready to exchange images with other banks," he said.
But a national network that makes it easier for banks to exchange these images will probably accelerate the technology's adoption, Mr. Lettko said. "The big issue is understanding the endgame," he said. "This network is a big piece of how things are going to look."
Grant Cole, a senior vice president in Bank of America Corp.'s government affairs operations group, said a dedicated network linking the nation's banks is a major step forward, because the alternative is requiring banks to establish, on their own, dedicated connections between every institution to which they may want to exchange digital check images. He compared this to the difference between stringing telegraph wires between towns and the creation of a central network of telephone lines. "We don't need to have tin cans on the end of the line anymore," he said.
Charlotte-based Bank of America is a member of Viewpointe and one of the three SVPCo companies endorsing the network. It is also an early adopter of image exchange for clearing checks, and already shares image files with J.P. Morgan Chase & Co. within the Viewpointe archive on a limited scale.
Mr. Cole said the easiest means of interbank image exchange is to use the same archive, such as Viewpointe, because they are all stored on the same systems. The alternative is to transmit the images from one database to another. This is comparable to coworkers being able to access the same data files from a central office server but having to e-mail the same file to somebody at a different company who does not have access to that internal network.
Mr. Lettko does not expect every bank to join Viewpointe, which targets the 50 largest ones. Some have chosen to use the Federal Reserve's FedImage Services Archive, which was introduced last May, and some prefer to maintain their own check image storage.
Viewpointe sees the exchanging of images within the archive as "a little more efficient than sending them around, but we're all working towards the same goal," Mr. Lettko said. "The key thing is to get image-exchange programs going somewhere."
Steve Whitney, a senior vice president at the Federal Reserve Bank of Boston in charge of the FedImage program, says the service already allows many of the bank's roughly 1,000 affiliated financial institutions to send and retrieve check images through the FedLine network, but that most of them now use the capability only for viewing their own stored checks. FedImage is storing approximately four million checks daily, against the 60 million to 70 million that arrive every night at Viewpointe.
Though the FedLine network offers capabilities similar to those of the envisioned SVPCo network, Mr. Whitney said it may not offer adequate capacity if interbank electronic check exchange becomes common practice. He said an expansive, high-capacity network for check images is something the industry will soon need, and that the Boston Fed would consider using the SVPCo network if FedImage customers start having to move check images between institutions. "That's really going to be necessary to facilitate the real exchange of electronic check transactions."
