While many banking companies are enthusiastic about storing check images at third-party archives, where they might exchange them, a Wachovia Corp. technology subsidiary is counting on continued demand for in-house check image archives.
Most large banks rely on a combination of in-house and outsourced archives. But with the recent emergence of two major third-party archives, the bank-owned Viewpointe Archive Services and the Federal Reserve's FedIimage Services, banks may want to reduce or eliminate their use of in-house archives.
Silas Technologies Inc., which Wachovia set up in 1999, hopes banks will choose in-house as well as outsourced. Its pitch is that setting up a proprietary archive can give a bank more flexibility and lower cost.
Silas helps set up in-house archives and provides software for them and support. But in three years its image archive operation has picked up only two bank customers apart from Wachovia - Bank of New York and $11.5 billion-asset First Citizens BancShares Inc. of Raleigh, N.C.
"Our belief is that an in-house archive provides financial institutions with the best ability to manage and enhance customer service using data and images that are stored in their archive," said Ray Gatland, Silas' vice president of product development for image technology system systems.
"Our solution is installed within the bank's data center, which allows them to store and manage images as they see fit to meet their needs," Mr. Gatland said. The archive is "robust, flexible, and allows the bank to leverage its benefits both externally and internally."
Wachovia is by far Silas' biggest customer. It has been using the technology now housed in the Silas division for four and a half years. The bank's archive now includes nearly six billion images, and 21 million are added every day.
In 1999, Wachovia won a patent for its technology for archiving and retrieving imaged documents, and this patent is at the heart of Silas' archive product offerings.
Silas, which is based in Winston-Salem, N.C., has two lines of business apart from image technology systems: business process consulting and application systems monitoring. All three contribute equally to its revenues, Mr. Gatland said.
Frank D. Robb, the chief technology officer at Wachovia Corp., said that as a rule it favors keeping technology in-house. An in-house archive helps Wachovia "set its own destiny" and create customized features, he said. Also, "maintaining our own intellectual capital gives us a competitive advantage."
In addition, keeping the image archive in-house is more cost-effective over time, he said. Wachovia has yet to realize a return in its investment in setting up the archive in the late 1990s, he said, but a bank that used Silas' out-of-the-box image technology would probably realize such a return in 18 to 24 months.
After a lull in interest, check imaging has recently gained a lot of ground.
- In late 2000, Bank of America Corp., J.P. Morgan Chase & Co., and International Business Machines Corp.'s Global Services division founded Viewpointe, which stores and retrieves but does not capture check images. Viewpointe targets the 50 largest banks as its customers.
- In May the Federal Reserve introduced FedImage, which captures, stores, and retrieves check images. Most FedImage customers are smaller banks.
Like Viewpointe, Silas' system does not capture images, but Mr. Gatland said it can work with any capture software or hardware. It is also compatible with the other archives, so banks can exchange images, he said.The benefits of an in-house archive include in-house connections and avoiding per-item fees, Mr. Gatland said. For example, he said, if a teller needed to look at an old check image to see if the signature matched the check being presented, the image could be delivered to the teller's workstation at no extra cost.
"By bringing the image archive in-house, banks have more flexibility in defining and revising data storage policies and parameters," Mr. Gatland said.
One disadvantage of outsourcing, he added, is that "if particular storage solutions become more cost-effective, or newer and cheaper storage solutions come to market … a bank could lose out on potential savings until the outsourcer decides to make changes - that is, if it decides to make the changes at all."
Silas targets banks that rely on mainframe computing, Mr. Gatland said, and any bank with enough check volume to justify a high-end system is a candidate. Even smaller banks could benefit from Silas' archive technology, he said, because they could make money by storing images for other banks.
First Citizens "went in-house because we want the ability to be self-sufficient when it comes to doing image statements and providing CD-ROM images to our customers," said senior vice president Denton Lee, its manager of central bank operations.
It chose Silas, he said, because the technology was compatible with its own mainframe system.
Not having to pay a fee each time an image is stored or retrieved has made it much easier to provide check images in branches and on the Internet, Mr. Lee said. As a result First Citizens has been able to trim its research staff, he said.
Furthermore, like Wachovia, First Citizens helps offset archive costs by storing images for other banks - 10 of them. For the long-term, Mr. Lee said, "I think we are better off with our own archive."
Steve Schutze, the director of e-strategies at the American Bankers Association, said the reasons whether or not to outsource archiving vary from bank to bank. Silas offers "a valid argument for some banks, but each bank has its own needs," he said.
Archiving in-house is likely to permit more customization but entail more up-front cost and slower implementation, Mr. Schutze said. It also involves day-to-day costs, as does outsourcing. "You have to weigh what's best."
