Some standards are more standard than others.
Payment executives had been working for two years to determine how to implement a new standard designed to unify how networks accept data files and beef up the information included in those files.
But that effort has been scrapped, after participants concluded that the required changes, especially a new system for handling return items, would be too difficult to implement. Instead, they are opting to tighten the relatively flexible standard being used today.
Phyllis Meyerson, a senior vice president at the Electronic Check Clearing House Organization, the rulemaker for image exchange, said interest in switching standards declined in the past few years as image networks became a common part of the industry's check-clearing infrastructure and bankers became accustomed to using the current standard.
"If we go there, we have to make massive changes, and we don't want to make massive changes," she said.
The Federal Reserve Board announced last week that the CheckImage Collaborative, a group of image-clearing organizations, had created a "universal companion document," describing how to format cash letters so they can be sent to any of the image exchange networks.
That group has also come up with a third standard, designed to formalize the changes incorporated by the universal companion document.
The document is intended to smooth out the technical differences in exchange procedures mandated by the four major image-clearing systems: the Fed; The Clearing House Payments Co. LLC's SVPCO Image Payments Network; Viewpointe LLC's shared check archive; and Metavante Technologies Inc.'s Endpoint Exchange Network.
All these networks use a check-image standard known as X9.37. However, in the rush to prepare for image exchange when the Check Clearing for the 21st Century Act took effect in 2004, the networks set up their systems to accept X9.37 cash letters configured in a slightly different manner.
Each network has long had its own companion document explaining how to apply X9.37 to create image cash letters.
Though the processes are similar, the differences are significant enough to require banks to use different procedures for submitting data to each network.
Adopting the universal companion document is expected to eliminate this issue.
Of course, when payment executives announced in 2006 that they had developed a successor to the X9.37 standard, they were trying to address the same issue.
Brian Egan, a vice president in the Fed's retail payments office and a vice president at the Federal Reserve Bank of Atlanta, said the more bankers tried to determine how to implement the proposed successor format, known as X9.100-180, the more troublesome it looked.
Making their systems conform with the newer format — which is often referred to by the industry shorthand "180" — would have required "significant retooling … by banks of every size, and there wasn't a business case to do it," he said.
Standard-setting is a time-consuming process, and "180 got caught in the implementation of the Check 21 Act," Mr. Egan said. "By the time it got off-ballot and approved, Check 21 had been implemented, and the industry was moving forward," using the X9-37 format.
Andy Garner, an independent contractor working with Wachovia Corp. as a senior systems consultant, who was involved in the effort to determine how to move banks to the new standard, said return codes were the "nail in the coffin" for the 100-180 format.
The new standard called for a two-digit return code, providing banks 100 options for explaining why a check image had been sent back to the depositing bank; the current standard uses only a one-digit code.
The shift from a one-digit code to a two-digit code would of course have required all systems to be updated, but that wasn't the only consideration that apparently weighed on those negotiating the new standard. Mr. Garner said there were some vigorous debates over the issue, as bankers went back and forth over how much detail was necessary to explain why a check had to be returned.
In the end, he said, the decision to abandon the debate, and the new standard, was based on a single, pragmatic consideration: "It would take ages to retrofit the systems for the two-digit return codes."
When it became apparent that the new standard would cause more problems than it would solve, Eccho and the Atlanta Fed's retail payments office convened a group of banks, vendors, clearing systems, and other organizations, to come up with an alternative.
That group, which became the CheckImage Collaborative, came up with the universal companion document.
The group has also coordinated its efforts with Accredited Standards Committee X9 Inc., the standard-setting forum for the financial industry, to define another standard that would align more closely with X9.37.
That work led to a third standard, X9.100-187, which is out for ballot now.
George Thomas, a former executive vice president at The Clearing House and an early critic of X9.100-180, said the decision to abandon that standard makes sense for the industry.
"Look at the work that has been done to get to where we are today with the 9.37 standard," said Mr. Thomas, now the principal of Radix Consulting Inc. "Why put everybody to the expense to convert to a new standard when you've got one that's working?"
The CheckImage Collaborative said it could take 12 to 18 months for financial institutions and vendors to implement the universal companion document.
Mr. Garner said the document will provide banks and vendors with a road map while X9.100-187 works its way through the balloting process and eventual adoption by the American National Standards Institute Inc.
In the meantime, the industry is stuck in something of a standards limbo, becauase the X9.37 standard was never designed to be the last word in image exchange.
Instead, it was a "draft standard for trial use," and officially it no longer exists; it was retired in November 2006, after X9.100-180 was formally approved.
"180 is the standard, but nobody is using it," Mr. Garner said. By creating a universal companion document and developing the newest standard, financial companies will "have a valid standard that is compatible with what we're actually doing."
