Item processing continues to be a necessary evil in the finance industry. For years banks have struggled with controlling this labor-intensive and expensive, yet fundamental, operation. Now momentum is finally building for better solutions to the item processing conundrum.
Since the 1970s, predictions of reduced check volumes have tantalized bankers. Direct deposits, automated clearing houses, ATMs, and electronic bill payments were supposed to ease the pain of the check deluge. In the 90s, bankers are looking to debit cards, smart cards, and home banking to reduce those check volumes.
But in 1994, approximately 60 billion checks were written to U.S. accounts. This year, the American Banker's Association estimates that volume will increase to 67 billion. Although current technology provided some gains in productivity during the 1 980s, item processing shops are still trying to contain increasing costs. And in today's competitive environment, containing costs isn't enough; banks are also looking to establish new revenue streams.
How banks handle this growth could mean the difference between having a financial albatross or a financial asset. Today, more than ever, banks must secure their profitability, embrace technology innovations, and manage growth, while at the same time, confront demands for increased efficiency and productivity using fewer resources and limited funds. Solutions for such mission-critical operations must be thoroughly weighed for opportunity and risk.
Image-enabled item processing offers banks the opportunity to move to a new level of efficiency, productivity, and service. "The consensus among banks, bank software providers, and third-party software developers is that image technology in check processing will become the `ATM technology of the late 1990s'--required technology," says Dioga Teixeira, President of The Tower Group, which provides research and consulting about banking technology.
But as with new technology, the risks can be high. Tower Group analyst David Medeiros adds, "The most common reason given by banks for not yet implementing imaging in check processing operations is the prohibitive cost of the technology and a lack of demonstrated payback on investment, followed by limitations on tested and proven vendor-supplied solutions for high-volume processing."
For large institutions, conversion to image-enabled systems can take years and cost millions. To add to that risk, the item processing systems available for large banks are limited, with only a few mainframe solutions available and many issues yet to be resolved. These solutions are still struggling with image production and implementation. And because of the processing requirement on the host, mainframe systems offer no practical solutions for using imaging technology at remote capture sites.
"To date, payback results from banks that have invested in check imaging are mixed. Many banks are reporting net cost reductions, but other banks that have adopted check imaging, particularly on large mainframe-based systems, are actually reporting net increases in check processing costs, "says Medeiros.
The picture is brighter for community banks. "In the past, it was thought that only the largest banks could afford imaging technology. In reality, institutions of all sizes are showing a tremendous amount of activity and interest. Spending on check imaging will continue, with community banks leading the way," predicts Steve Ledford, Senior Vice President of Global Concepts, a consulting firm specializing in image technology and item processing. "Community banks have been successful in implementing cost-effective image item-processing systems. Larger banks can learn a lot from their approach toward more creative solutions that take advantage of leading-edge platforms."
Although more budget-constrained and historically more conservative in adopting new technologies, community banks have implemented check imaging quite rapidly in the last year because of their lower-volume and less technologically demanding operations. Community banks have the added benefit of choosing from a wider variety of check imaging solutions on less expensive client/server and midrange-based platforms.
The Tower Group confirms this trend with statistics showing that the number of banks adopting imaging technology will grow between 85% and 105% each year through the year 1997. They also project that annual spending for host-based systems will increase from $140 million in 1995 to $460 million in 1997. Projected annual spending on client/server based systems is expected to increase more than four-fold, from $125 million in 1995 to $525 million in 1 997.
"Banks that want to stay in item processing into the next decade will have to migrate to image technology. Image technology is going to break the mold of traditional check processing and the costs associated with it. Banks not introducing image will not remain competitive," says Ledford.
The key will be to find a solution that meets the current needs of the bank, but also protects against future obsolescence. Only a few vendors have addressed functionality of an image-enabled item-processing system along with recent innovations in technology.
VisualImpact, developed by Broadway Seymour, Inc., offers a next-generation entry in item and image processing software today. "Our product research reinforced our understanding of the need banks have for an intuitive, robust, reliable, and scalable solution," comments Phil Ruehlen, Senior Vice President and General Manager of the VisualImpact Product & Services group.
"VisualImpact provides a full suite of advanced-function applications that can be used in traditional as well as imageenabled item processing environments. The power and flexibility of VisualImpact is a direct result of the attention and focus placed on the system's underlying architecture. Rather than trying to overhaul a conventional item processing system by incorporating image, Broadway Seymour chose to design and build a new system from the ground up, with an architecture that fully exploits imaging and client/server technology"
By using the Microsoft[R] Windows NT[TM] operating system, VisualImpact is a true client/server implementation with an open systems architecture that offers a powerful, scalable solution for any itemprocessing operation. "The goals for the VisualImpact architecture were simple and straightforward: to provide the highest degree of scalability portability, and reliability in the market today. We think we have succeeded in meeting these goals," adds W.A. Proctor, Manager of VisualImpact Product Development.
Applications and systems should be able to take full advantage of the broad range of computer platforms available today. As a Windows NT based application, VisualImpact supports multi-bank, multi-sorter environments and can operate in both local and remote sites. It provides portability across multiple hardware platforms and can run on single processor or multi-processor workstations and file servers. The distributed computing capabilities, client/server architecture, and enhanced networking features also provide for the dramatic scalability of the system.
Where once a single, large mainframe computer was necessary for highvolume item processing, VisualImpact uses advanced hardware, networking, and operating system features to distribute the workload across multiple, distributed servers. The result is that VisualImpact can be scaled to meet each bank's unique processing requirements--whether it's 25,000 items per day or one million per day.
"Microsoft is pleased that Broadway & Seymour has selected Windows NT as the foundation for their new product. We are confident that the advanced networking and operating system features of Windows NT will provide the reliable platform financial institutions require for running mission-critical applications," says Pieter Knook, General Manager, Enterprise Customer Unit, Microsoft Corporation. "The combination of Microsoft Windows NT and Broadway Seymour's VisualImpact offers our mutual customers an exciting new solution for item processing operations."
In addition to its powerful architecture, VisualImpact will be available in modular applications, allowing clients to plan their investment. They can start with a traditional or an imageenabled proof-of-deposit system, an imageenabled statement system, or imageenabled archiving. The robust functionality of the system includes item capture and sort, reject re-entry, key entry, courtesy amount recognition, balancing, cash letters, power encode, image archive, statement research, customized statement design, and easy-to-use administration tools. Future enhancements include remittance processing, wholesale/retail lockbox, and corporate cash management options.
"The uniqueness of this product has opened exciting partnership possibilities with both Microsoft and others in the domestic, as well as the global, marketplace," says D. Keith Sides, Director of Sales and Marketing for the VisualImpact Product and Services group. "We're pleased to work with AT&T Global Information Solutions (GIS) and to include our software with their System 3000 family of workstations and servers and their various transports. We are excited about the impact AT&T GIS, Microsoft, and Broadway & Seymour can have on the future of item processing."
AT&T GIS's strategy is to work with partners to deliver turnkey solutions to the financial industry. "Broadway Seymour takes advantage of our enterprise servers and 7780 item/image transport," says Dan Steele, Vice President, Community Financial Group, of AT&T GIS. "Our joint strategy leverages AT&T's commitment to Microsoft Backoffice. Our goal is to add value on top of Windows NT to address a customer's enterprise requirements. By partnering, Broadway & Seymour and AT&T GIS are able to deliver enterprise solutions to the financial industry that enable customers to better manage their flow of information.
"AT&T GIS is shipping products today that address network management in a Windows NT environment and server hardware management," adds Steele. "In addition, we will release backup and restore capabilities and failover capabilities on Windows NT. The value to the customer is that an AT&T GIS Windows NT solution is an enterprise solution that addresses customer requirements that go beyond hardware and operating system capabilities."
The history of the AT&T GIS and Microsoft relationship spans over a decade. AT&T GIS was a co-developer of the SMP version of Windows NT and has continued the relationship by having both equipment and engineers on site at Microsoft's corporate development labs to work alongside Microsoft engineers on Windows NT, SQL Server, and Exchange performance testing and beachmarking. AT&T GIS now has over 300 accounts woddwide using Windows NT servers in the financial, insurance, retail, manufacturing, communications, transportation, and public sector industries.
In addition to the System 3000 family of workstations and servers, the AT&T 7780 offers easy migration from conventional MICR processing to image processing. The 7780 has widely been accepted in the market for imaging applications--with over 200 7780 imaging sites nationwide. The 7780 was developed from the ground up with imaging in mind and the workstation's System 3000 stand-alone controller offers power and flexibility.
The partnering of Broadway Seymour, AT&T GIS, and Microsoft--their commitment to emerging, powerful technology--makes VisualImpact, the System 3000 family, and Windows NT a promising solution for item processing, not only in the '90s, but into the next century.