National City Corp.’s online banking system now permits customers to view images of checks that the Cleveland company creates automatically for some bill payments.
Though most online bill payments are sent to billers electronically, customers often want to send money to individuals or small billers unable to receive these payments, which are typically routed across the automated clearing house network. In such cases the bank creates a paper check that is delivered by mail, but many banking companies display these payments online in the same manner as other bill payments that are settled electronically.
However, while electronic payments can be easily tracked if there are any problems, there is little paper trail for the paper checks created by the bill-pay systems; giving customers access to the check images, which can be printed out as proof of payment, will address that issue.
“The real advantage there is now those customers who make payments to nonelectronic payees now have a proof of payment,” said Mike Nordbusch, National City’s vice president and group manager for online banking and bill-payment services.
On May 21 National City unveiled a new bill-payment system that included the ability to view images of bill payment paid by check. It uses software developed in-house, and Metavante Corp. provides the back-end payment processing services. Metavante is the technology subsidiary of the Milwaukee banking company Marshall & Ilsley Corp.
Mr. Nordbusch said the previous vendor, which he would not name, was creating the checks, but they were not drawn on a Nat City account, so the banking company did not have access to them.
“We weren’t really able to present those images to customers, because they weren’t clearing on the National City account,” he said. “Now, for those minority of payments that go as paper checks, those items clear on our customer accounts and are picked up as part of our normal imaging process.”
Making the images available has led to better service and is saving money, he said, because customers no longer need to phone the bank to confirm that a paper check payment reached the payee, though he could not quantify how much money this would save the bank.
There were other significant changes to Nat City’s bill-payment site. It switched from the good-funds model of payment, which debits money from the customer’s account immediately to assure funds availability, to risk-based, which debits money only when the payment has been sent out to the biller.
Customers can assign nicknames to their payees, and most of their biller account numbers are masked for security. They can also look up payment history by payee rather than fishing for that information in their normal account records.
Cathy Graeber, a principal analyst at Forrester Research Inc. in Cambridge, Mass., said she was not aware of any other bank that offers images of bill-payment checks to consumers online.
Though it could reduce the number of inquiries consumers make offline about whether payments were delivered, there is a risk to offering these images, Ms. Graeber said. “Will consumers be surprised that electronic bill payments are still going by paper check?”
Indeed, nearly one in five online bill payments are still made by paper check, she said. And it’s not just to babysitters and mom-and-pop shops. “There are some larger billers that don’t take electronic payments,” she said.
But this concern probably will not spur consumer complaints, Ms. Graeber said. Banks that offer check images for bill payments “haven’t taken anything away,” she said, though they need to explain at some point to consumers why these images are available for only some payments.
Bob Meara, a senior analyst for the Boston market research firm Celent LLC, said, “I don’t think it’s common at all” for a bank to make check images for bill payments available to consumers.
“How big of a deal it is remains to be seen,” he said, “because it’s not been a standard offering, and consumer awareness is rather low.”
There is a cost to providing this — banks need to store more check images. However, the cost of storage has dropped over the past several years, so the trade-off in reduced call volume is a good one, Mr. Meara said.
“Conceptually, to me, it makes perfect sense,” he said.
