Two image networks say they expect the brisk growth in image exchange volume to continue this year as more banks begin clearing checks electronically or increase their trading.
The Clearing House Payments Co. LLC of New York said Tuesday that the number of items its SVPCO Image Payments Network settled last month rose 33% from November, to 11.7 million, and the value of items settled through the network rose 14%, to $73.4 billion.
Volume is also rising at Marshall & Ilsley Corp.’s Endpoint Exchange Network, which said Tuesday that it has cut prices in half for exchanges between banks in different Federal Reserve Board districts.
Alenka Grealish, the manager of the banking group at the Boston research and consulting firm Celent Communications LLC, said the developments bode well for accelerated growth in image exchange.
“Finally, things are picking up” in image exchange, Ms. Grealish said. “It looks good for ’06.”
George F. Thomas, an executive vice president at The Clearing House, said he expects SVPCO’s volume to increase fourfold this year. “My hope is that we will be running 50 million items a month by this time next year.”
In January of last year only two companies were using SVPCO — KeyCorp and JPMorgan Chase & Co., which exchanged fewer than 18,000 items worth less than $55 million that month.
Now 10 banks are exchanging images over the network, Mr. Thomas said. Two more are expected to begin doing so this month, though he said he would not name them until they go live.
Last month, Comerica Corp. said it had begun sending images to the Fed through the SVPCO network, and M&T Bank Corp. said it was sending files to the Fed and to another bank. The other banks using SVPCO are Bank of America Corp., National City Corp., Wachovia Corp., Fifth Third Bancorp, and UnionBanCal Corp. Wells Fargo & Co. sends images to Electronic Data Systems Corp., which prints them out and delivers them to banks that are not ready to eaccept image files electronically.
Endpoint, which is operated by M&I’s Metavante Corp., said Tuesday that it has eliminated its “out-of-district” pricing category and is now charging a base fee of 1.5 cents for all images it transmits, not only those sent within a single Fed district. (Some Endpoint customers get volume discounts.)
Jeff Vetterick, the general manager of Endpoint, said the pricing changes had been planned for “a long time.” The original pricing structure made sense when the network was launched in 2002, because of the initial set-up costs and because of the way people were used to paying for check transportation.
It costs more to clear paper checks over long distances, because of the transportation and float expenses, he said. By contrast, “there is a lot of same-day settlement” for items cleared within a single Fed district, and Endpoint initially had to offer a lower price for such items to attract customers. “Otherwise, people would just continue trading paper, if it was cheaper to do that.”
But as the network’s volume has grown, two-tier pricing made less business sense, he said, because there are more participants to share the fixed costs, and any cost difference between transmitting images down the street and sending them across the country are “rounding errors.”
Mr. Vetterick estimated that banks transmitted 10 million check images worth $5.5 billion over Endpoint last month. In September it cleared about 8 million checks for 3,500 banks, and in August it said that it had 2,500 users sending 6 million images every month.
Endpoint expects its volume to swell even more in the coming months. In November, Bank of America began using Endpoint to send images from the shared archive operated by Viewpointe Archive Services LLC.
Mr. Vetterick said B of A’s volume has been small so far, but it is not expected to stay small; in the past he has said B of A alone could increase his network’s volume by 50 million items a month.
Alenka Grealish, the manager of the banking group at the Boston research and consulting firm Celent Communications LLC, said Endpoint had probably reached a point in its growth where its executives could justify cutting its prices.
“I think they are pretty astute to do it early” in the shift to image exchange, she said, because having high prices could have caused Endpoint’s volume to “drift away.”
According to Ms. Grealish, SVPCO has a pricing advantage over Endpoint, because The Clearing House offers its own settlement services. Endpoint users must settle through the National Clearing House Association of Dallas, which sends monthly invoices to Endpoint’s users.
SVPCO’s steep growth last year was not surprising, since its large bank users tend to start slowly but ramp up their volume once they work out the kinks in their systems, she said. Working out those kinks “takes longer than expected.”
