CHECK IMAGE technology is often regarded as the province of large, high-volume banks. But now community banks are beginning to get the picture.

Already several banks with assets under $1 billion have become the first in their markets to offer check image statements - which contain miniature pictures of checks rather than the checks themselves - to their retail customers.

The American Banker/Ernst & Young 1993 Survey of Technology in Banking indicates that community banks will be focusing more on imaging. The survey shows 15% of community banks - defined as any bank with less than $1 billion in assets - expect to have imaging capability by the end of 1993, with 24% setting their sights on 1995.

For community banks, the possible benefits of check imaging are many, including lower operating and postage costs, better customer service, and Improved marketability.

"Small banks have moved quite aggressively to use imaging technology." said Charles W. McDonough, a partner with Andersen Consulting in Detroit. "The key challenge for community banks is to offer the same services of the larger banks while keeping the personal touch part of their own offerings."

Raising the level of customer convenience is key. Community banks have realized that in today's climate, a familiar face behind the teller counter and toaster giveaways may no longer ensure that customers will keep coming back. Like those consumers who bank with the big guys, community bank customers are demanding convenience and heightened service.

A possible solution for some aggressive but modestly-sized banks - particularly those battling encroaching superregionals - is imaging.

"Institutions looking to get an edge are finding that check imaging just may be it," Mr. McDonough said.

New technology, he noted, allows small banks to return images of checks to customers rather than the actual document, store images for archival purposes, retrieve images in response to customer inquiries, and provide images for use in signature verification.

"The bottom line of our bank is to serve customers better, and getting them the information they need faster is a big part of that," said H. Leigh Ballance Jr., president and chief executive officer at Unity Bank and Trust Co., Rocky Mount, N.C.

Unity was the first bank in North Carolina to offer image statements to its checking account customers. This puts the $145 million-asset bank ahead of neighboring mega-institutions such as First Union Corp., Wachovia Corp., and NationsBank Corp., which have yet to offer a similar service.

Unity uses imaging as a way to demonstrate its technological leadership and show that it is at least as progressive as bigger banks in the market.

"Imaging checks has allowed us to differentiate ourselves from the other banks in the area," said Mr. Ballance.

Unity purchased a PC-based imaging system from Broadway & Seymour, Charlotte, N.C. The system, called Echo, was developed from software purchased from Document Solutions Inc.

Cost savings from the imaging program fund the bank's no-fee checking product. According to Mr. Ballance, that has translated into a gain of 1,500 new accounts since the system was installed in February. The average balance for those accounts is $528.

While Unity's system is already up and running, many community banks are still looking for a check imaging system to give them the same edge.

"There are a tremendous amount of benefits to check imaging in banks our size," said Terry W. Goettsch, director of information processing at TransFinancial Bancorp., Bowling Green, Ky.

The $370 million-asset institution, which has been toying with the idea of check imaging for about a year, is currently looking at software from Albuquerque-based G.G. Pulley & Associates Inc., which provides document processing software for International Business Machine Corp.'s AS/400 line of mid-range computers.

Mr. Goettsch thinks Pulley's SuperStmt application will enable the bank to reduce the costs of statement preparation and mailing, while providing other marketing and fee income opportunities. Though no contract has yet been signed, TransFinancial is moving toward a decision.

"If everything falls into place and the coast benefits are there, we'll be up and running before 1994," Mr. Goettsch said.

With community banks currently keen on imaging technology, bank technology vendors also are jockeying for position.

"Small banks have moved into imaging faster than I personally had expected," said Doug S. Halvorsen, marketing manager at IBM. "Thus, we are expediting our plans to get into that imaging market,"

Earlier in the year, IBM extended the availability of its check imaging system to the AS/400 line, enabling banks of all sizes to use the technology. Previously, the company's imaging system was available only for its mainframe computers.

Also seeking more community bank customers, Dayton, Ohio-based NCR Corp. has combined two of its products to give smaller institutions access to imaging technology. NCR's 7780 reader/sorter system. combined with its System 3000 computer, offers small banks a way to enter the world of check imaging.

Some smaller banks without check imaging capability are using the technology in other, areas. Many are buying additional hardware to store images of paper documents on optical disks and installing software that enables tellers and customer service staffers to access those images using desktop computers.

According to the survey, 8% of community banks have already installed such applications, called file folder imaging systems. A total of 18% of the banks surveyed plan to have file folder imaging in place by the end of the year. Looking ahead, 41% of community banks have penciled in 1995 for their foray into file folder imaging.

Interestingly, this is an area where many small banks are ahead of the curve. Most larger financial institutions, even those with advanced check image applications, are still years away from implementing similar archiving and research systems for other operations;.

The main reason community banks are on the cutting edge of this activity: the smaller volumes involved make testing and implementation much simpler.

One bank that has gone this route is American State Bank, a $135 million-asset institution in Sioux Center, Iowa.

By taking advantage of a check image's portability, American State is significantly reducing paper use and speeding up customer check inquiries, said Beverly J. Jensen, a vice president and cashier.

Powell, Wyo.-based First National Bank was one of first community banks to use an optical storage unit. Back in 1989, the $102 million-asset bank searched for a way to archive documents like checks, mortgage applications, and new account applications.

"We had too many piles of old paper reports around, and we wanted to find a way to get easier access to documents and respond quicker to customers' needs," said Bob Sanson, vice president of data processing.

Unable to find an existing system to meet the bank's needs, Mr. Sanson built his own. With an initial $32,000 investment, the bank is now optically storing documents.

It's clear that check imaging has yet to achieve critical mass. But the survey results indicate - and industry observers agree - that image will increasingly become the fashion in the industry.

"Imaging is the industry's new point of focus'" said Mr. McDonough of Andersen Consulting.

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