Comerica Inc. of Detroit, which a year ago looked like a leader in the nascent technology of clearing checks by exchanging digital images, has chosen a different role.
At this time last year SVPCo said Comerica would be one of the eight "vanguard banks" testing its image exchange program last August. Now the banking company is looking at this year's third quarter, says Paul Obermeyer, Comerica Bank's director of operations services.
"I will admit I would like for us to be further along," Mr. Obermeyer said in an interview Monday, "but we want to focus on substantive execution, as opposed to achieving a milestone for the sake of publicizing it."
What happened?
Even before the Check Clearing for the 21st Century Act was signed into law in October 2003, Comerica was looking for a strategy for check imaging, Mr. Obermeyer said.
Company officials realized that image-based clearing "was going to be a fundamentally new way of managing our business," said Mr. Obermeyer, a senior vice president. "We wanted to take a thorough and controlled look at our operations" - and begin by trying to imagine the end state that bankers should be working toward.
The company also concluded that because of the complexities, projections of how fast the industry would swing to image-based clearing were overoptimistic, Mr. Obermeyer said.
In the SVPCo case, events confirmed that impression. None of the eight vanguard banks met the early target dates for launching the exchange.
Even now, only five of them are using it - KeyCorp and J.P. Morgan Chase & Co.'s Bank One since September and Bank of America Corp., Wachovia Corp., and Wells Fargo & Co. since last month. (Electronic Data Systems Corp., which has taken a role in check imaging as a printer of image replacement documents, also started participating in the tests last month.)
Image-exchange volume re-mains low for all the banks. By March, National City Corp. and Union Bank of California - neither of them among the original eight - as well as the Federal Reserve are expected to begin image exchange through SVPCo, which Clearing House Payments Co. of New York owns.
Comerica decided on a go-slow approach to achieve specific goals, Mr. Obermeyer said. These include creating a system for processing check images that is as reliable and accurate as its system for processing paper checks, including in adjustments and returns; linking the image system with its core processing system and other payment systems, including those for wire transfers, automated clearing house transactions, and electronic funds transfers; and addressing customer service issues.
The alternative, Mr. Obermeyer said, was to start with a rudimentary processing model and then enhance it over time. The advantage of doing that, he conceded, "is that you get to market sooner and you build your requirements based on actual experience."
But Comerica chose instead to think through the entire project first and then start building systems, he said. "When we execute it, we will execute it in a seamless fashion."
He acknowledged that Comerica's approach carries risks. But he said, "We think the combination of the experience that we have with image processing and the common platforms that we have across our processing centers is much more suitable" to the go-slow approach.
Unisys Corp. one of Comerica's main suppliers of check processing hardware and software, helped with the analysis. Comerica has been consulting with the Blue Bell, Pa., company using Unisys' 3D Visible Enterprise methodology.
Susan Long, a senior vice president at Clearing House Payments, heads its electronic clearing services. In an interview last week, she said that many big banks will begin exchanging images in dribs and drabs this year to test their systems, and then accelerate next year.
"It will be a hockey stick," Ms. Long said, reiterating a view that the Clearing House has enunciated before. "2005 is the implementation year, as we see it; 2006 we see more as the ramp-up year."
Mr. Obermeyer expressed doubt the shift will happen that fast. Large segments of the industry have yet to make the necessary investments, he said. Widespread adoption may not occur till 2007, he said, and banks may not fully convert until 2008.
In any case, he insisted that Comerica would be ready by the time image-exchange starts to accelerate. "We will be there in ample time, and as ready as any to ride that hockey stick up."
