Huntington Bancshares of Columbus, Ohio, says an electronic check- depositing system it patented last year can cut costs significantly and move funds faster into corporate customers' accounts.
Huntington Electronic Check Deposit, or ECD, lets companies like major retailers, credit card processors, and utilities send checks directly into the payment system, eliminating at least one operational step along the way.
Designed for companies that receive millions of checks a month, ECD can reduce the payment cycle by one to four days, said Richard C. Ercole, president of Huntington Treasury Management Company.
"Not only does it have the effect of speeding up the cash flow, but it also reduces the cost to the company of clearing the check," said Mr. Ercole.
Because corporate clients perform much of the processing, they can save between 1 cent and 2 cents a check, or up to 30% of what Huntington charges.
"Previously, incoming checks were recorded twice-once by the company accepting the check and once by the depositing bank," said Terry Geer, senior vice president in Huntington's treasury management unit.
"With ECD, the need to physically handle checks twice for processing is eliminated," he said. "This shortens processing time and reduces the float before those funds are available to the company."
Functioning as remote check-processing centers of the bank, clients sort, endorse, microfilm, and encode checks on Huntington's behalf. They then transmit an electronic file containing the data embedded in the checks' magnetic-ink lines to the bank, which then credits their accounts.
Following procedures developed by the bank and based on the patterns of incoming checks over a 30-day period, the customer prepares the deposits and feeds them directly to correspondent banks or the Federal Reserve clearing system.
The ECD system is used by six Huntington cash-management customers, including Ameritech Corp. and Electronic Data Systems Corp.
Huntington developed the system in response to a request by Ameritech, and the telephone company's operations in Michigan, Ohio, and Wisconsin have used ECD since early 1993 for processing five million checks monthly. "There is a lot of operational logic" behind the system, said Susan M. Sarkesian, manager of cash operations for Ameritech.
"If we are doing a quality job of processing our payments, there is no added value in having them run through Huntington's systems all over again," Ms. Sarkesian said.
Huntington hopes to license its patent-No. 5,583,759, titled "mechanism for expediting the deposit, transport, and submission of checks into the payment system"-to other financial institutions.
"It is interesting that Huntington was able to get a patent on this in 1996," said Edward L. Neumann, director of the Washington office of Dove Associates. The patent was awarded Dec. 10, and Huntington is only now announcing its availability for license.
MICR-the magnetic ink character recognition standard used in encoding checks-"has been around for decades," Mr. Neumann said. "The capability to do this is not all that new, but no bank has ever attempted it. I'll bet there will be great demand, assuming it is reasonably priced."