Viewpointe Archive Services LLC is planning a major upgrade to its check-archiving network.
The short-term goal is to boost the Charlotte company's ability to meet the growing demand from its customers for image clearing, but the system is also being designed to support a proposed payments format that would link the automated clearing house and image-exchange networks.
Several major banking companies, along with the Federal Reserve banks and Nacha, the electronic payments association, are in the early planning stages for such a system. But critics have said that one of the concept's weaknesses is that it would likely require banks to obtain images of their customers' checks from archives where they are not members.
Rich Walsh, Viewpointe's chief information officer, said that once its systems are overhauled, that is exactly what Viewpointe will be able to offer. "What we are trying to build here is a system that is robust enough to offer images on demand" to any banking company.
Jennifer Lucas, Viewpointe's director of marketing and communication, said that Viewpointe already uses an on-demand model to settle payments among its members; banks store images in the archive and grant each other access to the file. "The sharing model has been great, but right now it only works within the Viewpointe family," she said. Once the upgrade is complete, banks that are not part of the family will also be able to demand access to images stored there.
Mr. Walsh said that as part of the planning process, he has been talking with the bankers and trade associations that are trying to create a converged image-ACH payment system. The idea is that banks that have installed image technology could use the data stored on images to create ACH payments to settle transactions with banks that cannot receive images.
Bank of America Corp., Wells Fargo & Co., Zions Bancorp., Nacha, and the Fed have all come out in favor of the idea; and Zions said last week that the companies could begin testing within three months.
Viewpointe's current network can provide up to 100 check images per second to members. When the new version is installed, banks will be able to download up to 3,500 per second. International Business Machines Corp., which built the current system, is also developing the new one. Mr. Walsh said he expects to be testing it by the end of the year, and that some of Viewpointe's members could begin installing the systems in the first quarter of next year.
When banks convert checks into ACH files, they create a new payment instrument and remove the check from the payment stream. Existing check conversion processes include provisions for notifying people that this might occur, but if banks begin converting images into ACH files behind the scenes, it would be difficult to inform the people who originally wrote the checks.
About a quarter of consumers still receive their cancelled checks (or printouts of images) with their monthly statements. Banks say they would have to continue to provide this documentation, even if the images are stored elsewhere because another bank used them to create ACH payments. That means banks must be able to demand images of their customers checks that are housed in archives where they are not members.
John G. Feldman, a senior vice president and the image transactions and payments executive with Bank of America Corp., said that Viewpointe's on-demand model "really sets up" the transition to a converged ACH-image payment system. "It's the foundation."
Viewpointe is owned by five of the biggest banking companies in the country - B of A, Wells Fargo, JPMorgan Chase & Co., U.S. Bancorp, and SunTrust Banks Inc. - and stores images for several others. There are currently some 76 billion images in its archive, and 100 million are added every day. The archive claims to handle about half of the industry's total check volume.
However, George Thomas, an executive vice president at The Clearing House Payments Co. LLC, said that making the images stored in Viewpointe available to nonmembers would not solve the problem of obtaining images from other archives, which store the other half of the industry's check images. The Clearing House's Electronic Payments Network unit, along with the Federal Reserve, operates the two ACH networks. Mr. Thomas said he is opposed to a combined ACH-image network.
"As far as I can tell, this only means banks can be pulling images from one archive, and there are hundreds of archives," he said. "Going into hundreds of archives is different from hundreds of banks going into one archive."
Ms. Lucas said that one solution is to consolidate image archives. "You need to have a national archive," she said. "We believe Viewpointe is going to become the system of record."
Though many banks have their own archives now, she said that some might reconsider this strategy in the next few years because check volume is falling. "They may realize 'I can't double-down on my image investments, so maybe I should use Viewpointe.' "
Mitch Christensen, the executive vice president of payment strategies at Wells Fargo Services Co., the technology division of Wells Fargo, said that the new Viewpointe system means that "moving to image-on-demand could become a reality."
He also said that a later phase of the project could involve developing a "universal indexing system," which would enable banks to find and retrieve images from any archive.
Mr. Walsh said that his company has talked about such an index, though there are no current plans to develop one. "It's difficult, but not impossible, to go outside the archive and guarantee access. It's technically possible, but a ways off."
The upgrade project could also shake up the ACH market because the new Viewpointe network would be able to carry ACH files, as well as images, and the electronic check presentment information that banks already use to settle check-image payments. "It's designed for any kind of payment," Ms. Lucas said.
However, Mr. Walsh said that he does not expect to challenge the existing ACH infrastructure, which carried 14 billion payments last year. "I'm not saying we will encroach" on EPN and the Fed, he said. "But we will be an option if banks want it."
Mr. Thomas said he was not concerned about the potential threat posed by Viewpointe entering the ACH market. "They will need to get established as an ACH operator," he said. "They have a long way to go. I think they should stick to their knitting."
