Three banks that worked as partners with NCR Corp. to develop a low- cost check-image processing system are now in full production on the system.

The banks - Wachovia Corp. of Winston-Salem, N.C.; National City Corp. of Cleveland, and Frost National Bank of San Antonio - were test sites for NCR's Scalable Image Item Processing Solution, or Siips, a system that captures images of unencoded checks and prepares them for sorting.

The NCR system differs from other major image-capture systems for check processing in that it runs on networks of desktop computers and is designed specifically for labor-intensive proof encoding.

The more expensive high-speed image processing systems from International Business Machines Corp. and Unisys Corp. use images throughout the process, from proof encoding to high-speed check sorting.

In 1993, when NCR began testing its system, "IBM and Unisys were selling the whole shop, but the cost savings were all on the proof-encoding side," said one banker who requested anonymity.

NCR's system can be used to process from 100,000 to several million checks a day, and banks can add capacity to the system as requirements grow.

The system starts at about $1 million for hardware, software, and consulting services, NCR says. High-speed image-capture systems for item processing typically start at several million dollars.

Wachovia is NCR's largest user, encoding over two million checks daily on peak days at four sites in Atlanta; Columbia, S.C., and Raleigh and Charlotte, N.C.

"We believe we have the largest image-based proof of deposit installation in the world at Wachovia," said Wolfgang Dalichau, vice president of U.S. sales for NCR's financial systems group, formerly the financial business unit of AT&T's computer business.

Earlier this month the unit changed its name back to NCR as part of the splitting of AT&T into three companies.

"We needed a solution that would coexist with our existing technology and one that wouldn't outgrow our needs in a couple of years," said Paul N. Boone, executive vice president of Check Services at Wachovia.

"We feel we have the industry's leading technology that can easily handle our growth projections," he added.

National City installed the system at its Columbus, Ohio, operations center in January 1994. The system handles some 400,000 unencoded items daily - about one-third of total daily check volume at the site.

"We looked at Unisys and IBM, but NCR was a scalable solution that let us move into this without a huge capital expenditure," said Virginia Otter, senior vice president at National City.

National City has four processing sites, and expects to reduce labor costs in those sites.

"It's been impossible at two of those sites - Columbus and Indianapolis - to find part-time labor for off-shifts," said Ms. Otter. "We have had to use full-time labor and to pay higher wages than ever before."

Frost National Bank of San Antonio is using the NCR system for image statements, CD-ROM image delivery and proof of deposit.

The $4.2 billion-asset bank, a unit of Cullen/Frost Bankers Inc., uses the NCR system to encode about 380,000 unencoded items daily, about 30% of its total check volume.

Frost National Bank has cut its staffing requirements in half in the proof-encoding area, bringing the number of full-time equivalent employees down to 45.

The NCR system "allowed us to implement multiple image applications ... while protecting our investment in our existing IBM mainframe-based (check processing software)," said John Spencer, senior vice president at Frost.

NCR's SIIPS proof-of-deposit, image archive, image delivery and consulting services are commercially available.

The system is compatible with check software applications such as IBM's CPCS and Computer Associates' Super MICR software.

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