The number of banks and credit unions that can receive check images is rising sharply, further reducing the need to print image replacement documents.
Though many large banks were quick to install imaging equipment in recent years, they quickly found that they could use the technology only to settle transactions with other banks that had the technology, and they had to use IRDs to settle the rest. However, according to the Electronic Check Clearing House Organization, at the end of June nearly 4,000 financial companies - almost a quarter of the industry - were ready to receive imagses, and most of them were small and midsize companies.
David Walker, the Dallas clearing house's president, said it was no longer tracking the number of companies that could send files, because the number of receivers has become more important.
Technically, Eccho is tracking not the number of companies that can receive images, but the amount of routing and transit numbers that banks are using to do so. At the end of June there were 3,990.
Most of the financial companies receiving images are using just a single routing number, Mr. Walker said. Even large banking companies, which often have numbers for different regions or business units, are rolling them out one number at a time. As a result, the routing number total closely correlates with the number of companies that can receive images.
"It's a significant number," and one that surprises many in the industry who had been concerned about slow adoption of image exchange, he said.
(Another large banking company recently started using image exchange - The Clearing House Payments Co. LLC announced Monday that PNC Financial Services Group Inc. of Pittsburgh had begun exchanging images over its SVPCO Image Payments Network. PNC is the 15th participant in the network, which connects with the Federal Reserve Banks' image system.)
Eccho's numbers show electronic clearing continuing to close in on substitute checks. In June, 43% of the 206.8 million imaged checks cleared electronically.
Eccho said $404.37 million of payments cleared using substitute checks, compared with $74.75 million cleared electronically.
Mr. Walker said banks often clear high-dollar checks using IRDs, because of advantages such as faster settlement, but they have been slower to open routing numbers for high-value payment types - such as controlled disbursement for corporate customers - to receive images.
"You don't want to experiment with high-value checks," he said.
Still, $2.3 billion of checks were paid in the first half using images for at least part of the process, and the value is climbing every month, Mr. Walker said.
"We've never had a major change in the payment systems of the U.S. that has proceeded as rapidly as this one has," he said. "The pace of this change is really unprecedented."
Aaron McPherson, the research manager of payments at Financial Insights Inc., a Framingham, Mass., unit of International Data Group Inc., said that small banks and credit unions are quicker to receive images than their large rivals.
"It is a large number, but less surprising if you take into account the size of the banks involved," Mr. McPherson wrote in an e-mail. Small banks outsource their check processing to a third party that can spread the cost of upgrading across its customer base, or the banks are small enough to use less expensive technology that can be replaced more quickly.
The more extensive, often custom-built, processing systems at large banks, make it more difficult and expensive for them to upgrade to image exchange, Mr. McPherson said. "However, clearly they are driving enough volume to give us the numbers we are seeing here. These cannot be all community bank checks."
