U.S. Bancorp expects to be able to process check images in all parts of the company next year and probably will clear a majority of its checks that way by the end of that year.
The Minneapolis company said that imaging technology would have significant ramifications for its corporate banking operations, including offering customers a better picture of their balances. The project also will have benefits for the retail side, where the company says features like faster funds availability and better security could improve its relationships with customers.
Thomas E. Rea, U.S. Bancorp's executive vice president of transaction processing services, said it has set a schedule for enabling all its routing and transit numbers, which define geographic areas or types of accounts, to clear checks as images.
The speed of the rollout will be determined by the company's ability to handle exception items, such as returned checks and adjustments, he said; the last routing numbers to be image-enabled will be those for controlled disbursement accounts, which corporate clients use to make payments.
Though some companies historically have used controlled disbursement to delay clearing and maximize check float to preserve their level of investable funds, Mr. Rea said U.S. Bancorp has had no resistance from corporate clients about using images to accelerate the settlement of their payments. The better value lies in delivering corporate clients a complete financial statement first thing in the morning, so treasurers can make better financial decisions through the rest of the day, he said.
In fact, "we're probably diluting the value of the [controlled disbursement] product right now," because of the difficulties in consolidating reports on check and electronic collections, Mr. Rea said. "We will resume a high-quality product when we get more volume on the image side."
Kent V. Stone, U.S. Bancorp's executive vice president of strategic support services, said that imaging also has benefits for retail customers, such as faster check clearing and better fraud protection, though the company has no plans to tout its imaging to consumers.
"We don't say, 'Hey, we have a debit card,' " he said. "We sell it as a benefit."
Some customers could see the benefits of imaging more directly, as it could help small-business customers - especially microbusinesses - keep up with their cash positions, Mr. Stone said. "They're watching their balances like hawks."
But for the most part, U.S. Bancorp will sell image exchange as an enhancement to customer service, he said. "It's all the little components," he said. "Each one of those ties the customer a little tighter to the bank."
Mr. Rea discussed U.S. Bancorp's imaging strategy last week after The Clearing House Payments Co. LLC, of New York announced that U.S. Bancorp had begun exchanging images on its SVPCO Image Payments Network last month. U.S. Bancorp became the 17th large banking company to use the network, the Clearing House said.
U.S. Bancorp is using a "shotgun approach" to image exchange, he said, using the Federal Reserve banks, the shared repository of Viewpointe Archive Services LLC, and the Endpoint Exchange Network operated by Metavante Corp. (through Viewpointe's connection with Endpoint).
U.S. Bancorp is exchanging images with two dozen major trading partners through Viewpointe and SVPCO, he said, but "we probably have thousands" of partners if the ones on the Fed and Endpoint forwarding systems are included.
The company plans to "maximize every relationship we have in '07 and '08," Mr. Rea said.
At yearend U.S. Bancorp's image exchange volume likely will be 10% to 20% of its total check-clearing volume, including items sent and received, he said. "We're shooting for 40% to 60% by this time next year, maybe even more than that."
Aaron McPherson, the research manager of payments at Financial Insights Inc., a Framingham, Mass., unit of International Data Group Inc. of Boston, said that banks receiving corporate deposits want to accelerate those payments, so it makes sense for the paying bank to image-enable its controlled disbursement accounts as a matter of customer service.
"Clearing is so fast now, you may get some mail float, but once it enters the bank of first deposit, the clearing is pretty fast," Mr. McPherson said. "If the corporates want to play the float game, they need to go to electronics and schedule the payments for later in the month."
Last week the Clearing House reported that monthly image exchange volume on SVPCO's network topped 100 million items for the first time last month.
George F. Thomas, an executive vice president at the Clearing House, projected that image-exchange volume on the network would more than double next year, to 2 billion images, from about 720 million this year.
