Mellon Financial Corp. is offering to convert check images into automated clearing house payments for businesses that are using its remote deposit services.
The Pittsburgh banking company said one customer, the Princeton, N.J., nonprofit Educational Testing Service, is using the conversion service now, and Mellon plans to offer the service to others.
Thomas M. Meiman, a vice president at Mellon and a product line manager in its cash management unit, Mellon Working Capital Solutions, said that ETS receives mostly consumer checks, which are eligible for conversion into ACH payments under the accounts receivable conversion format.
However, it also receives some checks from businesses, such as those paying for employees' continuing education. Such checks, which are not eligible for ARC, will continue to be cleared through image replacement documents.
The service is "a convenience to the customer," Mr. Meiman said in an interview Thursday. "The idea is to have the solution be transparent to them."
Mellon, which exited the retail banking business in 2001, began testing remote capture 18 months ago, he said.
It has not rushed into image exchange, though it is developing image-processing capabilities. Mr. Meiman said most of its corporate customers receive their checks back through controlled disbursement, and float remains "a very important feature to many of our customers." Image exchange likely would accelerate clearing and cut into their float revenue.
Bob Meara, a senior analyst at the Boston research and consulting firm Celent LLC, said other banking companies are likely to introduce similar capabilities. Remote deposit was one of the first products to take advantage of check imaging.
"It was not particularly efficient, but it allowed them to get to market quickly," he said.
Mr. Meiman predicted that within 18 to 24 months, Mellon would be separating ARC-eligible items from its customers' other remote-deposit images, clearing the images where it could, and reducing the number of IRDs.
"Banks have never needed their float managers the way they need them today," he said. "The number of variables that need to be considered in effecting an efficient clearing strategy has grown exponentially in the last two years."
