Huntington, Signet Lead in Imaging
In the race to process all checks through image systems, Huntington Bancshares has pulled nose to nose with the previously acknowledged leader, Signet Banking Corp.
Huntington, based in Columbus, Ohio, last week became the second bank to use imaging technology to process all types of checks - an important step forward in a project that may save the bank as much as half a million dollars in operating costs per year, starting in mid-1992.
Signet, whose headquarters are in Richmond, Va., processes about the same volume through its imaging system as Huntington. And both banks' systems are from Unisys Corp.
Check image processing involves identifying and sorting digitized images of checks rather the paper items.
Speed and Savings
"We want to get up on imaging as fast as we possible can," said Rick Sellers, president of Huntington Services Co., the bank's automation arm.
Mr. Sellers sees savings as only one benefit of the new system. He believes it will enable him to increase fee income by offering new services to companies and other customers.
About 26 banks and other companies are rushing to convert their labor-intensive check processing to highly automated operations centering on image technology. With the "checkless society" nowhere in sight, bankers think that imaging, which speeds up the check processing, can bring big savings.
Other bankers agree with Mr. Sellers that imaging technology provides opportunities to increase income from fee-based services. And some believe they can gain market share by providing retail customers with account statements that include images of the checks rather than the checks themselves.
Services to Corporations
"Cost cutting is a strong motivation behind imaging," said Mr. Sellers. "But equally as strong is fee-based income potential."
For example, Mr. Sellers plans to market check services to corporations that do their own encoding. He also sees a market among corporations to receive via computer an image of all their checks for account reconciliation.
Signet plans to send retail customers the images of their checks, rather than return the checks. Robert Lane, a vice president at Signet, does not expect the service to gain market share, but he does see it as reducing the bank's postage costs.
The race to install check image systems has three front-runners. Huntington, Signet Banking, and Comerica Inc. were early adopters of the Unisys image processing system.
Banks that signed on for a check image processing system from International Business Machines Corp. - typically bigger banks such as Security Pacific - still await delivery of key software for the system.
Encoded Checks and Unencoded
Huntington and Signet both use the new imaging system to process and balance encoded checks that come in from the Federal Reserve and other banks. Each has been able to eliminate staff positions and cut the time it takes to balance the books.
But most of the cost-cutting benefits of image-based check processing derive from processing unencoded checks, which come in from branches. Lawrence Ivins, a West Coast manager for EDS Corp., a unit of General Motors, estimates that 80% of the savings in imaging comes from this type of check.
The savings stem from reducing the number of clerks who encode checks. About 40% of the checks that Huntington and Signet handle are unencoded.
5,000 Checks a Night
Until last week, Huntington's image received already encoded. Last week the bank began putting unencoded checks through the system.
Huntington processed as many as 5,000 unencoded checks a night last week using imaging - about the same number as Signet. That's about 10% of the total number of this type of check that Huntington receives.
Mr. Sellers said he plans to process all encoded checks through imaging by yearend. Mr. Lane of Signet said all encoded checks will run through the new system within two months.
Comerica is processing a much smaller number of unencoded checks daily and doesn't use the system for them.
Mr. Sellers said imaging has already brought a 33% boost in clerks' productivity. Over the next year, he will eliminate as many as 35 clerks, about a third of the encoding workers.
Mr. Lane said the imaging system, which costs $7.5 million, will pay for itself and save $8 million over five years.