A year ago Clearing House Payments Co. LLC laid out an ambitious schedule that called for as many as eight of its bank-owners to be exchanging check images through its network by the end of 2004.
The New York payments outfit fell well behind that plan (just two banks began using the system last summer), but it is making up ground quickly.
George F. Thomas, a senior vice president at Clearing House Payments, said this week that three more banks, as well as a major banking industry vendor, went live last month on the system, operated by its SVPCo unit. Two others (along with the Federal Reserve) are scheduled to do so this quarter.
In total, Mr. Thomas said that 16 of the company's 19 bank-owners are expected to start using its image exchange network sometime this year.
The news adds to the momentum for image clearing. In the past month Viewpointe Archive Services LLC, which operates a massive shared image archive, said two of its bank customers had begun clearing check transactions with images, and several more will be doing so by the middle of this year.
The SVPCo system cleared a key milestone in September, when KeyCorp and J.P. Morgan Chase & Co.'s Bank One began settling transactions through the system. However, there had been no additional news about the network since then, until this week.
Mr. Thomas said that Bank of America Corp., Wachovia Corp., Wells Fargo & Co., and Electronic Data Systems Corp. all began moving images across the network last month.
The Fed could start doing so by next month, he said, and both National City Corp. and Union Bank of California (a unit of UnionBanCal Corp., which is mostly owned by Mitsubishi Tokyo Financial Group Inc.) are scheduled to do so in March.
Mr. Thomas said the timing of the projects shows the importance that bankers put on image exchange. "Usually you don't do any implementations in December," because banks typically "freeze" their systems that month to avoid any software glitches that could interfere with closing the books and yearend reporting, he said. "We were fortunate to get those implemented in December."
Key and JPMorgan Chase continue to clear a small number of transactions through the SVPCo network. SVPCo is bringing on participants in pairs, and each participant is exchanging only with its assigned partner. Eventually, all the participants will be able to send and receive to one another.
For now, B of A is only sending files, and its partner, Wachovia, is only receiving them. Wells Fargo is also in send-only mode, to EDS, which is receiving the files at various processing sites and then printing them as image replacement documents to deliver to banks for settlement.
Analysts said that the developments are encouraging, but that switching bank systems from paper-based to image-based clearing will be a lengthy and complex job.
Some of the bankers were also cautious about discussing their use of the network.
Margie Green, a spokeswoman for Wachovia, described its image-exchange efforts as "a pilot on SVPCo's platform" that has been used to clear transactions for only a few weeks. She said executives were not ready to discuss the project, and she would not say when the Charlotte company would ramp up its use of the system.
Mitch Christensen, the executive vice president of payment strategies at Wells Fargo Services Co., the San Francisco banking company's Scottsdale, Ariz., technology division, confirmed that it is using SVPCo's system, but he also said Wells wanted to gain some more experience with the system before talking about it.
"We're going to get there as an industry, and Wells is going to get there as a bank," Mr. Christensen said in an interview Monday. "This is all brand new stuff. People have never done this before."
Wells announced Monday that it had purchased an equity stake in Viewpointe. Wells is now Viewpointe's fifth bank-owner and its 11th customer.
Banks using the system said that initial volume was very low, but Steve Ledford, the president of the Atlanta payments consulting firm Global Concepts Inc., said the numbers would eventually pick up.
"Over the coming months and the next year or two, you're going to start to see some volumes that you can hang your hat on," Mr. Ledford said. "Image exchange is the way this is going to be done."
Fred Herr, a senior vice president at the Federal Reserve Bank of Atlanta, said the Fed should complete its testing of the SVPCo network late this month or early next month. (The Fed also has its own systems for archiving and processing images.)
"It all seems to be coming together. We haven't hit any walls, any showstoppers, that would keep us from making that deadline," Mr. Herr said in an interview Tuesday.
However, he acknowledged that the central bank has encountered some difficulties. "I think everybody is having some unexpected issues, but you have to remember this is new technology, new processes, new software, that all has to work with legacy systems."
Image-exchange volumes could pick up by March, as the current participants gain confidence in using the network and additional banks come on board, Mr. Herr said. "A lot of these pieces will begin to come together, and people will start putting a little more volume on the system."
Mary Ann Francis, a senior vice president and the manager of global trade and treasury solutions at National City, said Tuesday that she expected her Cleveland company to start using the system in March.
"We were ready in November," Ms. Francis said. "But the bank we were partnering with needed a few more months." (She would not identify that bank. National City is currently paired with Union Bank.)
Robert Hunt, a senior analyst at TowerGroup, a Needham, Mass., market research unit of MasterCard International, said the participants in the SVPCo network face several challenges, not only in clearing checks over the network, but also in working with other networks and producing monthly statements with images.
"The SVPCo banks have to make multiple models work," Mr. Hunt said. "We have an extremely complex project that we have to break down into individual pieces and work on all of them at once."
He predicted that the implementation would continue to crawl through most of this year before it gets up to walking speed. "I don't know if we get to run before the end of the year, at best."
