Electronic payments may have been in the air at a Bank Administration Institute conference last week, but on the ground check processing equipment dominated.

At the BAI's annual Transaction Processing Conference, which used to be entirely focused on check processing, at least two-thirds of the many speakers addressed some aspect of pushing the payments system in electronic directions and away from checks.

Many voiced optimism that after more than two decades of anticipation, electronic transactions are finally about to go mass-market.

But checks are believed to have set another record last year, at 62 billion, accounting for 79% of all consumer bill payments and 85% of all noncash transactions.

By now even the industry veterans who have viewed the "checkless society" talk with the same skepticism as the warnings of the boy who cried wolf agree that paper is on the wane.

But the convention exhibit floor told a different story.

Notwithstanding the occasional smart card reader or Internet bill payment demonstration, the booths with the biggest crowds were all about the more efficient handling, storing, and presenting of paper checks.

"We are still talking about a lot of paper that is going to be around," said Paul A. Carrubba, managing principal of Carreker-Antinori Inc., Dallas. "It is way too soon for banks to make the decision not to invest in technology to process checks. They are going to be around long after I am gone."

BAI released a study it conducted with Payment Systems Inc. predicting that 65% of U.S. households would use some from of electronic bill payment by 2000, up from 38% in 1995.

The study also projected that with help from federal and industry initiatives, the check's share of bill payments could drop as low as 42% in that time.

"There has yet to be a silver bullet that will dispense with checks," said W. LeGrande Rives, chief operating officer of the Federal Reserve Bank of St. Louis and one of the participants in a conference panel on future payment systems.

"We need to educate consumers that they may not need the paper check."

Mr. Rives added, "We are going to have to look for ways to get consumers the information that they are seeking" through improved electronic statements or check images.

But ultimately it will be the consumer who determines if such efforts succeed or fail.

Electronic bill presentment programs-like those offered by Integrion Financial Network, Checkfree Corp., and the Microsoft Corp.-First Data Corp. venture MSFDC-could play a role in loosening the public's grip on paper.

But they will have to offer public payment methods that are truly simpler and more convenient than check writing.

"You could have a situation where consumers are getting promotional messages from individual financial institutions, consortia, and billers," said panel participant Elliott C. McEntee, chief executive officer of the National Automated Clearing House Association.

"When consumers are hit with positive marketing messages from many sources, there is a high probability of getting them to change their behavior," he said.

Turning consumers against paper isn't the only way to "electronify" the check, to use a piece of newspeak evident in the BAI crowd.

Several conference sessions centered on difficulties in electronic check presentment, which automates the payments and enables truncation, which eliminates much of the physical movement of the documents.

Although the Fed electronically presents 13% of its checks (a number growing dramatically), even very large banks have encountered obstacles in establishing the necessary bank-to-bank electronic relationships. NationsBank Corp. reflects the industry trend, achieving less than 1% of its volume.

"This is not something that we want to show our chairman," said Jerry Chambers, senior vice president of NationsBank Corp.

But Mr. Chambers remains committed to the practice as a means of strengthening the industry's hold over a business it controls 90% of- checking accounts.

"We need to look for ways to make the check as convenient as the credit card or the debit card," he said, envisioning a network that would enable consumers to write checks that would be truncated at the point of sale, converted into electronic information.

Several electronic payment initiatives are competing for industry attention.

One is the Financial Services Technology Consortium's e-check, described by project manager Debbie O'Dell as a "signed, sealed, and delivered" electronic check.

The system is being piloted by Citicorp, Mellon Bank Corp., and Glenview (Ill.) State Bank.

Glenview uses the system to distribute the dividends of a local customer, Cummins-American Corp.

Mellon receives utility payments on behalf of Pennsylvania Power and Light. Citibank will be announcing its pilot shortly.

Taking a long view of the financial industry in the conference's final- day keynote session, strategy consultant Gary Hamel said banks would not be content with "taking out 10% of the costs of check processing."

Chairman of San Francisco-based Strategos, Mr. Hamel divides the business world into "rule-makers," "rule-takers," and "rule-breakers."

He cited Merrill Lynch, Smith Barney, and Charles Schwab, respectively, as brokerage industry examples in those categories. Banks had better become rule-changers, he urged.

He flashed a graphic of the dramatically increasing sales volumes for pre-washed, pre-chopped, and pre-packaged lettuce over the past half- decade. "My friends, if you can do this for a head of lettuce, you have no excuse" for not "revolutionizing" the check processing industry.

More in the mainstream of the conference agenda was Comerica Inc. chief information officer John R. Beran, arguing that bankers must collaborate to create a centralized "utility" that can minimize back-end costs.

The effort should begin internally, he said.

"Get a team of payments people together to talk about cross-pollination and create a payments czar.

"You may wish to create a profit center that incorporates all of the payment methods and have its own production department under one roof," Mr. Beran added.

That could translate into revenues and profits, turning an operational cost-center into a valuable business.

"There are biller files that are making money, and we could too if we sold information," said Citibank vice president Dan Schutzer, who is president of the Financial Services Technology Consortium.

Conference attendance rose slightly this year, with 950 bankers and 1,550 exhibitors.

To increase the attention to vendors, the BAI ran a game, "Digital Gold," that it had initiated at the larger Retail Delivery Conference in December.

About a quarter of bankers participated by registering with their smart cards at individual booths and redeeming credits in the "Web Cafe" for a chance to win a stay at the Ritz-Carlton Hotel.

The product announcements were mostly about more mundane things than smart cards.

Unisys Corp., for example, said it upgraded its VisualImpact image and item processing software to be compatible with Microsoft's COM protocol. It also announced a Visual Remittance and Payment Application designed to enable smaller banks to read, verify, and encode checks and other items.

Greenway Corp. of Carrollton, Ga., announced an alliance with Transpev Corp. of Brazil, which will utilize Greenway's image processing system in 20 data centers.

Image Systems International Inc., Oklahoma City, introduced a document imaging system for indexing and storing loan documents, credit reports, financial statements, and the like.

Wausau Financial Systems Inc. of Mosinee, Wis., and Wheb Systems Inc. of San Diego announced a partnership to offer WFS' check and remittance payment application with Wheb's image recognition software to banks.

ICM Electronic Banking Services Inc., Great Neck, N.Y., introduced Banktrack, an Internet-based cash management and funds consolidation system. Companies can be up and running on the service, outsourced through NCR Corp.'s data centers, for $20,000.

The day before the conference began, Checkfree Corp. announced the sale of its item processing business to Conix Systems Inc. of Houston. copyright c 1998 American Banker, Inc. All Rights Reserved. http://www.americanbanker.com

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.