Vast improvements in handwriting recognition technology have helped some banks cut time and expense out of their check imaging operations, but it seems that some major banks are not yet aware of the enhancements available to them - or that they don't think the advances are sophisticated enough to justify the expense.
Executives at several community banks - which as a category have shown more interest in check imaging than larger banks have - say that the handwriting recognition software they have installed recently has been immensely valuable, and that this differentiates it from the products they tried a few years back.
This technology is known in the banking industry as CAR/LAR, for courtesy amount recognition and legal amount recognition. CAR technology is meant to recognize the dollar amount in the field located after the dollar sign on the right-hand side of the check. LAR technology reads the field in the middle of the check in which the customer has written the amount in words and numbers.
A new version of CAR technology was installed 18 months ago at $750 million-asset Glenview State Bank in Illinois. "We tried CAR five years ago and we couldn't get the technology to work," said Ron Gafron, Glenview's chief technology officer. "This past time, the technology is a lot better. We just love it."
In the early 1990s Glenview became something of an imaging pioneer when it managed to cut its postal costs in half by mailing statements that replaced actual checks with images. It also raised its profile in the eyes of its customers by using imaging to hasten check research and, eventually, to post digitized checks on the Internet.
While larger banks such as Wachovia Corp. and Bank of America Corp. are just starting to examine the customer service benefits of these types of offerings, Glenview already is well into the next lap of imaging. The bank is getting read rates of 70% or more on some documents, Mr. Gafron said, and it expects the rates to get even better as customers use up their old stocks of checks and deposit slips, which were not designed to be read by machines.
CAR technology has allowed Glenview to forgo replacing one full-time employee who left its check processing operation, and is also credited with letting the bank more affordably staff a new venture in retail lockbox, Mr. Gafron said. Employees who normally would be devoted to check processing now can be deployed in the new lockbox operation.
Similarly, Summit Bank of Arkadelphia, Ark., last month completed a fine-tuning of its check imaging system that put its recognition rates just above 70%, said Rick Coke, a senior vice president and the chief information officer. He expects the read rates to hit 75% to 76% within seven to eight months as old documents get cycled out of the system, he said.
Summit, which has assets of $400 million, needs only three staffers during the day to encode the 30% of documents that need to be manually keyed. With imaging, proof operators look at an enlarged image of the check on a screen versus the actual check, making this encoding process about 30% quicker, Mr. Coke said.
Summit tried CAR technology about five years ago, but the read rates were only 30% to 35%. "It didn't make sense at all," Mr. Coke said. Now, "CAR has really improved over the last couple years and it keeps getting better," he said.
Handwriting recognition rates have gone from around 40% to 60% to 70%, according to Robert Hunt, a senior analyst at the TowerGroup technology consulting firm in Needham, Mass. But it may take a while for big banks to begin experiencing the gains small banks already are getting from CAR, he said. One reason small banks have excelled in check imaging is that organizational barriers are much easier to cross, he said. Instituting check-image capture in the branch, for example, is an easier task when only a couple of branch managers need be involved.
Larger banks also have big investments in powerful check processing equipment, which is not always easily retrofitted for imaging. Smaller banks have been able to buy into more affordable and scalable check imaging systems. "The business case for larger banks has been complicated by their existing equipment," Mr. Hunt said.
In the mid-1990s, SunTrust Banks Inc. was one of several banks that installed check image technology in the hopes of slashing labor costs. But it backed off, after failing to get the productivity benefits it was seeking.
Robert C. Whitehead, the Atlanta company's chief information officer, blames the weakness of CAR technology for the project's downfall. CAR was to have eliminated the need for expensive human help in the back-office proof-of-deposit operations by automatically reading the handwritten numbers that appear in the boxed courtesy amount area of the check - but, at the time, it did not.
SunTrust got back into imaging this year by taking an equity stake in Viewpointe Archive Services LLC. Now, the bank is focusing on imaging's potential to improve customer service and foster industrywide image exchange, Mr. Whitehead said. But it is still wary of deploying imaging to improve back-office productivity.
"I haven't seen a lot of announcements that would lead us to believe handwriting recognition has gotten any better." Mr. Whitehead said.
Mr. Hunt of TowerGroup said that it has. Moreover, he predicts that big banks will find themselves with too much check processing equipment on their hands over the next few years, as more consumers use debit cards and electronic bill payment, and more paper checks are converted to electronic debits at the point of sale.
Also forcing checks out is a Nacha rules change handed down in March that allows items going through retail lockboxes to be transformed into automated clearing house debits, Mr. Hunt said.
"All that may drive big banks to go to smaller, scalable, image-based proof of deposit, and really restructure their check processing operations," he added.
