The Federal Home Loan Bank of Topeka, Kan., is installing a system that will let clients of its check processing services deliver image-based statements to their customers.

The home loan bank has invested $2.5 million in the technology, signing contracts with Advanced Financial Solutions, for its ImageVision software, and with Recognition International, for its reader-sorters.

In doing so, it joins a parade of more than 300 institutions and processors that have bought check-image systems in recent years.

The systems - which use special cameras to create digitized images of checks - aim to improve efficiency by reducing the paper involved in various check processing functions, including statement rendering and proof of deposit.

The Topeka Home Loan Bank, which processes checks for about 150 financial institutions in Colorado, Kansas, Nebraska, and Oklahoma, will begin producing image statements in its Topeka processing center in the third quarter.

After the initial installation, the technology will be phased in at sites in Oklahoma City, Omaha, and Denver at 90-day intervals.

The bank considered installing imaging systems five years ago. But financial institutions' interest in the technology was insufficient then, said Robert Mackey, senior vice president of operations at the Topeka Home Loan Bank, and the equipment was too costly.

An increase in customer demand for image-based services, combined with more affordable equipment, led the bank to reevaluate using the technology. More than 50 of the bank's customers have shown an interest.

"If you want to be in check processing today, you have to do imaging," Mr. Mackey said.

Image statements - in which images of canceled checks are printed on a standard-size sheet of paper and sent to customers instead of the actual items - are thought to be attractive because they make record keeping easier for consumers.

Images can be printed in numerical order on a pre-punched sheet of paper that can be stored in a three-ring binder.

The software being installed at the home loan bank will enable 24 images to be printed on each side of a page. Image statements tend to be 40% to 60% cheaper to mail than traditional statements, which are weighed down with a bundle of checks.

The number of checks per page can be adjusted to accommodate the needs of particular customers, Mr. Mackey said. "For example, we can handle a visually impaired customer's request for only three checks printed on a page."

The home loan bank, which stores check images on microfilm, will give customers copies of checks for up to seven years. More sophisticated archival capabilities, enabling images to be stored on CD-ROM and thereby providing for customer service applications, will be added in 1996.

The bank will also offer image proof-of-deposit processing for some customers. The image proof-of-deposit function scans paper checks for encoding and balancing, which greatly improves back-office efficiency. It's also thought to reduce check processing costs 20% to 30%.

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