As bankers, vendors, and industry watchers gather this week to discuss a proposed converged payments system that would use both image exchange networks and the automated clearing house, a variety of opinions is starting to emerge.
Some executives say that the concept is fine but so complicated that it is unlikely to ever be built, despite the clout wielded by its four major backers: Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and Zions Bancorp.
Others question whether a converged network really would benefit the industry, and some say that the noise and activity associated with this nascent project are slowing the adoption of a system that already exists - image exchange.
All these ideas are expected to be on the table today when a conference organized by the Check ACH Coalition, which was founded by the four banking heavyweights, kicks off in Chicago. The goal of the two-day meeting is to build a consensus about how a converged system could work.
About 60 banking companies, vendors, trade groups, and rulemakers are scheduled to attend.
Carl Carande, a principal at the accounting firm KPMG LLP and the Check ACH project coordinator, called the meeting "a working session" where participants would take their first comprehensive look at the thorny interrelated issues.
Those issues include whether ACH or image exchange rules need to change; what legal constraints might apply; whether new types of ACH transactions would need to be defined; business requirements for collecting and paying institutions; and the architecture that would need to be designed to give banks access to image databases.
If the participants can agree on "the definitions around the rules and the processes," that "would exceed the expectations" for the conference, Mr. Carande said.
Not everyone who plans to attend supports the idea of a converged network.
James Hicks, a senior vice president at Wachovia Corp. and the executive of its image technology group, said the Charlotte company plans to send a delegation to Chicago, though he finds the concept "fairly problematic."
The industry is making good progress in increasing the number of checks settled through image exchange networks, he said, and helping more banks get connected to systems that exist now would be a better use of industry resources than trying to create a new one.
Many banks already send and receive images through exchange networks but cannot reach the financial companies that have not installed image systems. The basic idea behind the Check ACH system is that image-ready banks could send electronic payment files to those that are not image-ready through the ACH network, which reaches every financial institution.
However, "almost everybody I've talked to is doing something or talking about" installing image systems, Mr. Hicks said. "I think we're trying to solve a problem that's not going to exist in a year or two."
Viveca Y. Ware, the director of payments policy at the Independent Community Bankers of America, expressed concern that the effort could slow down the adoption of imaging systems. "For banks that have not made a decision, hearing about this initiative could cause them to delay any kind of decision for now."
An ICBA survey released in November found that 14% of community banks were using image exchange, and another 58% were planning to start doing so within two years.
Mr. Carande said that "the guiding principle" of the coalition is to make sure the project "is complementary to image exchange."
A important component of the proposed system would be a shared image archive, or a network of archives, that would make files available on demand.
Some bankers are deeply mistrustful of the coalition's initiative. One community banker in the Midwest, who requested anonymity because she was not authorized to speak publicly, said she was concerned that the industry giants driving the discussion now could use their power to control pricing or the availability of stored images.
"If the archive doesn't work today, it's not their checks that are not going to be displayed for their customers. It's mine," she said.
But other community bankers were more sanguine about the concept.
Ben F. McAnally, an executive vice president at First Financial Bank in Abilene, Tex., said he did not plan to attend the conference, because his bank lacks the technological expertise to contribute to the discussion. Nevertheless, he voiced confidence that industry groups such as the ICBA and rulemakers, such as Nacha, the electronic payments association, would work to preserve a level playing field.
"Nacha will look out for the best interests of all financial institutions, because they represent all financial institutions," he said, though he said he planned to keep track of the coalition's progress.
Mr. McAnally joined the coalition's organizers in a panel discussion about the proposed payments system at the Bank Administration Institute's TransPay conference in May. His bank, a unit of the $2.7 billion-asset First Financial Bankshares Inc., a multibank holding company in Abilene, exemplifies the rapid shift toward electronic payments. At the time of the TransPay conference, the bank had no image exchange capability. Today it is sending and receiving images through the Federal Reserve Banks and two correspondents.
Still, Mr. McAnally said the proposed system offers significant cost advantages over existing ones, because clearing ACH files can cost about a tenth of a cent per item, while clearing images costs closer to a penny, and it can cost about a nickel to print an image replacement document.
"I feel what is trying to be accomplished will be a tremendous benefit to us," he said.
Steve Kenneally, the director of payments and technology policy at America's Community Bankers, said that any system that blends ACH and image clearing likely would require amendments to existing payments rules.
"By design, those things are not meant to change quickly, and that's a good thing," he said. "No matter what happens, I don't expect this to be an overnight kind of deal."
