Michigan National Corp. is capturing check images at a remote processing site using a new system from International Business Machines Corp.
The system, the first of its kind installed by IBM, is meant to help banks get the full benefits of image processing by making it unnecessary to re-sort and reprocess paper checks.
Michigan National, based in Farmington Hills, is using the system mainly to streamline the production of check image statements, which consist of miniature pictures of canceled checks. It has been delivering the statements to customers for two years.
In the past the check images were captured at the mainframe site, because the mainframe drives the production of the statements.
However, officials of the $8.3 billion-asset bank said this process was inefficient in that it required checks to be sorted twice - once at the remote sites and once at the mainframe site.
By capturing images at the remote processing sites, the bank needs to sort checks just once, during the initial processing run.
After processing, tapes of the images are transported to a mainframe site where they can be used for other applications, such as image statements.
In the future, the bank may be able to eliminate the physical transportation part of the process by sending check images over telecommunications lines.
The cost of doing this is high right now, because the bank would need powerful T-1 or T-3 lines to handle the volumes of images it would send. However, as telecommunication costs drop, electronic transportation of images may become a viable option.
In the near term, however, Michigan National officials believe the new system will enable the bank to expand beyond retail image services.
J. Victor Perez, director of item processing with Michigan National, said the new system provides him with a platform to grow his image strategy and move into the cash management side of imaging.
Mr. Perez said Michigan National's corporate customers -which include a strong middle-market base and some large corporations - are increasingly demanding check imaging, particularly CD-ROMS and daily exception items.
Not only will a bank save money from reduced check transportation costs, but also "you can certainly make more profits from a single product and be more consistent in what you offer as a bank," Mr. Perez said.
Geoff Emerson, a general manager of IBM Payment Solutions, said the installation at Michigan National is part of IBM's strategy to "develop an alternate platform to give banks more flexibility," especially in this era of frenetic bank consolidations.
"We were able to solve a business problem for (Michigan National), and it was able to give us some early feedback on the new technology."
IBM, also plans to develop proof-of-deposit and archiving capabilities from remote sites for Electronic Data Systems Corp., Plano, Tex.
"We are actually testing the POD application with them, and will be very shortly with two other applications," Mr. Emerson said.
He believes that upwards of 60% of all checks processed in the United States are handled at remote sites, away from the bank's mainframes. The remote sites make it easier for banks to clear check funds on time.
Diogo Teixeira, president of the Tower Group, a Wellesley, Mass.-based consulting firm, said IBM's remote processing capability addresses a concern shared by many bankers.
He said large banks have perhaps "dozens of such remote sites scattered around, but only one mainframe."
