Bankers promoting a converged payments system that would use both imaging technology and the automated clearing house network say there is strong interest, and they hope to begin testing the system next year.
However, that statement is less optimistic than initial ones that said a converged system, which is still in the very early planning stages, could be tested as soon as this month. And some backers acknowledge there is plenty of uncertainty over how to connect the two payments systems, or whether doing so is even the right approach.
Though many banks already use image exchange networks to settle checks electronically, many others have yet to install the systems needed to do so, and some image-ready companies hope linking the two payments systems would help them send and receive electronic payments with the ones that are not.
Many of the major banking companies that have invested in electronic payments systems are facing pressure to find ways to use that technology to reduce check processing costs.
"We have excess capacity, and we are charged by our shareholders to address that issue," said Earl Jennings, a senior vice president for check processing at JPMorgan Chase & Co. "If this is not the right vehicle, then we're going to be back next year with another idea."
Jeffrey B. Kline, a senior vice president in the enterprise payment strategies group at Wells Fargo & Co., said that the converged network would need widespread support. "In order for it to be successful, it has to be an industrywide effort"
It seems that the idea has at least sparked widespread interest - 260 people, from more than 145 banking companies, vendors, payments associations, and other organizations, have signed up for a Web seminar on the proposed system next Tuesday. The seminar is sponsored by four major banking companies calling themselves the Check ACH Coalition: Wells Fargo, JPMorgan Chase, Bank of America Corp., and Zions Bancorp.
The seminar will provide "a construct for pulling this discussion together," Mr. Kline said. "It's an open invitation to participate in this process."
Though the coalition's four members have been working on the project for months, all comers will have the opportunity to contribute to the design, he said.
"There is a perception that the solution is already designed," Mr. Kline said. "It is not."
The coalition made a big splash in May during panel discussions at a pair of industry meetings: the Payments 2006 conference sponsored by Nacha, the electronic payments association, and the Bank Administration Institute's TransPay conference.
The basic idea is to use the ubiquitous ACH network to deliver information about checks to institutions that are not ready for image exchange. Doing so would let image-enabled banks settle payments electronically with those that are not, and it could reduce the volume of image replacement documents.
The coalition is taking a deliberate approach, and it has backed off some early predictions. In May some boosters said that a pilot test could be under way in 90 days, and that the system could be in commercial production by the start of next year. On Monday, Mr. Jennings said the coalition's members hope to make a "go/no go decision" by December and begin a test with a small number of participants next year.
One of the goals of next week's seminar is to solicit input from non-coalition members, he said. "We expect to have a lot of debate and, the way it's going now, a lot of public debate."
Before a test can get off the ground, bankers must develop a consensus about the basic architecture of a converged system.
For example, nobody expects to use the ACH network to transmit image files. Instead, some have proposed holding the images in a massive shared archive and providing them on demand to banks that need to see them. Banks could use ACH files to send each other something akin to a Web link.
Viewpointe Archive Services LLC announced a plan in May to upgrade its shared image repository to enable an industrywide "image on demand" service. The Charlotte company claims to store 70% of the nation's check images, and 11 large banking companies, including the four coalition members, store images in its archive.
However, Viewpointe's archive is not the only shared one. The Federal Reserve banks and Fiserv Inc. of Brookfield, Wis., the nation's largest nonbank check processor, also provide such services, and other banking companies maintain image archives in-house, complicating any effort to retrieve those images.
Mr. Jennings said how and where to archive images is an issue that should be addressed collaboratively.
"This is not a Viewpointe exercise," he said. "Interoperability is where we have to be."
However, other payments executives said they are dubious about the entire concept of a converged system.
Jeff Vetterick, the general manager of Metavante Corp.'s Endpoint Exchange image network, said the "science project" could distract bankers from the task of setting up image exchange systems. "Banks are fairly conservative in their investments."
Talk by big banking companies about developing an alternative system to the image exchange networks could have "a chilling effect on current investment," he said. "I don't see it as a viable near-term solution."
Another question that must be addressed is which regulatory framework would govern a converged system, the Uniform Commercial Code and Regulation CC, which apply to checks, or Reg E, which covers ACH transactions.
Mr. Kline said that will be a topic on Tuesday's seminar. "The idea is to put some parameters around the industry discussion, and one of those is Reg E versus the UCC."
Bankers also should consider how a converged system will affect their customers, he said. "Constituents such as consumer groups are likely to have opinions," Mr. Kline said. "There's still a lot of discussion to be had to understand the ramifications to each constituent."
Some observers from outside the banking industry say they should be included in the discussion sooner rather than later.
Gail Hillebrand, a senior attorney for the product-testing and advocacy group Consumer Union, said the regulatory issue is too important to leave to the industry. "That is more than an operational question. That's a really important question for consumers."
Reg E is more favorable to consumers than Reg CC, because it requires banks to offer faster credits to customers' accounts if there are disputed payments, she said.
Regardless of how such issues are decided, "a better design would be thinking through these things at the front end," rather than having the industry present a completed design to consumers, she said.
