The Western Payments Alliance announced Monday that three of its member banks have begun a check image exchange pilot program, making them only the second group in the country to settle check transactions in an electronic format.
At least two other organizations are developing similar programs for the nation's largest financial institutions, but they seem to be trailing some smaller banks, which are now moving beyond the development stage.
Gerard Milano, the president and chief executive of WesPay, the San Francisco regional payment group that has organized the exchange program, said smaller banks are leading the industry in image exchange. "It's flat simpler to do image on a smaller-scale system," he said. "I think the little guys will be ready when the big guys are ready to exchange with them."
This shift mirrors the earlier transition to internal image systems. Smaller banks were among the first to implement systems for archiving image files instead of paper records, and to distribute images of checks with customer statements instead of returning the original items. Mr. Milano said this again is because implementing such a change is easier at a smaller company.
Steve Ledford, the president of the market research firm Global Concepts in Atlanta, said it is easier for the community banks that use all-image systems internally to start sharing these image files among themselves. "Many of the smaller banks are already 100% image, so it's not that hard for them" to begin an image exchange program, he said. But the larger banks are also moving rapidly in the same direction, he added.
On Sept. 19 the Bank of Marin, California Bank and Trust, and Farmers and Merchants Bank of Central California began trading check images among themselves. Initial volume has been very low, with just 19 items posting the first night. Within the next few weeks four more WesPay members plan to join the program, Mr. Milano said, and the additional participants will increase traffic across the system.
One of the largest will probably be Zions Bancorp of Salt Lake City, which plans to begin sending images to other WesPay banks this quarter, according to Danne Buchanan, an executive vice president with Zions First National Bank. He is also the chief executive officer of the Zions subsidiary NetDeposit Inc., which is providing some of the software for this program. The images themselves are moving through a network operated by Electronic Data Systems Corp. "We absolutely plan to use this system," he said.
Zions is also a member of Viewpoint Archive Services Inc., a consortium of some of the biggest banks in the country. Viewpoint has tested image exchange and expects to implement the format eventually, but has no concrete plans yet for trading images among its members.
Small Value Payments Co., a second group of major financial institutions, is developing its own network for exchanging image files, which is expected to be running by early next year. Both Viewpoint and Small Value Payments are trailing WesPay and the Endpoint Exchange, an Oklahoma City network that began testing image exchange last November.
With the emergence of several check image networks, Mr. Ledford said the next step would be for the separate systems to connect with one another to trade image files.
