Harris Bank is entering the world of digital check technology, but it is only taking a baby step — it said Wednesday that it had signed up to store its check images with Viewpointe Archive Services LLC.
The $51 billion-asset Chicago unit of Bank of Montreal plans to focus initially on building an archive at Viewpointe, of Charlotte, and introducing image statements to its retail customers. For the moment, Harris has no plans yet to implement the image-exchange and sharing capability Viewpointe is developing to let its members settle checks electronically.
That tentative choice, in many ways, indicates the quandary facing many midsize banks, which know they will need to implement image technology in the near future but are still not certain how they want to proceed.
“We know we’re going to do image exchange and image sharing,” but Harris will take its time in making decisions about how to proceed, said Michael Wandolowski, the vice president in charge of check and electronic payment services at Harris. “You’re going to need a year, I believe, before all the options are known.”
Harris has been working with its imaging technology vendor, Computer Sciences Corp., to implement the connection to Viewpointe.
And with less than two weeks to go until the Check Clearing for the 21st Century Act takes effect Oct. 28, many midtier banks are still moving cautiously toward exchanging images.
In many ways, midtier banks face a particularly daunting task.
Many of the nation’s largest banks, with their extensive resources and massive exchange volume, have played a critical role in developing both Viewpointe and the image-exchange network that Clearing House Payments Co. LLC will operate. In contrast, many small banks are turning to outsourcing vendors that can offer a ready-made image-exchange package.
But the midtier banks, many of which do not want to outsource their item processing and lack the resources of the biggest companies, are being more careful with their investments and proceeding more carefully.
Robert Hunt, a senior analyst at TowerGroup, a Needham, Mass., market research unit of MasterCard International, said many midtier bankers are just beginning to address the imaging issue. “They seem to be getting their heads around this and building a strategy, where six months ago there was just a lot of confusion.”
Though the nation’s biggest banks have made extensive plans for image exchange, the next tier of banks is in “a slower growth mode” and will probably begin ramping up their programs next year, Mr. Hunt said. “The critical mass will be there sometime in 2006. I think that represents a pretty good scenario.”
Harris is Viewpointe’s first new archive client since National City Corp. came on board in August of last year. John G. Lettko, Viewpointe’s chairman and chief executive, said he has been getting more inquiries from midsize banks recently, even though his company has curtailed its marketing efforts in favor of developing its image-sharing technology.
“We’ve been really concentrating not so much on archive sales,” he said. “We’re focused on getting ready for image exchange and sharing.”
Viewpointe probably will rely increasingly on vendors, such as Computer Sciences, to bring in new business from their bank partners, Mr. Lettko said. Doing so could help Viewpointe reach more midsize banks.
“We’re looking forward to seeing more deals like this come along,” and Viewpointe is expecting “to collaborate with others to facilitate these deals,” he said.
In a few cases, midtier banks have taken leading roles as imaging innovators. For example, First Tennessee Bank of Memphis, the principal subsidiary of the $27 billion-asset First Horizon National Corp., is already a full member of Viewpointe. Also, First Tennessee has been an early promoter of services that let business customers scan checks at their offices and transmit the images to the bank for deposit.
But for many banks, even those with some imaging capabilities, clearing checks via images remains an uncharted realm.
Frost Bank of San Antonio is installing software to exchange images, and it is preparing to test the capability with the Federal Reserve Bank of Dallas. Gary McKnight, an executive vice president at the banking subsidiary of the $9.6 billion-asset Cullen/Frost Bankers Inc., said he expects the first transmission to take place late this quarter or early in the first.
But Frost has no agreements in place with any of the image-exchange networks, Mr. McKnight said, though it has evaluated offerings from several providers, including Clearing House Payments and Metavante Corp.’s Endpoint Exchange Network, which settles through the National Clearing House Association of Dallas. The two clearing houses have different rules for settlement, he said.
“The networks are not as big a problem as the rules and the settlement,” he said. “We, as an industry, need to agree on a set of rules so we don’t have that problem, and it’s been difficult.”
Likewise, the issue of pricing remains unsettled, Mr. McKnight said. “We don’t have many items at all that we can send cheaper to the Fed electronically than we can send on paper.”
Mr. Wandolowski said such uncertainties are the reason Harris is holding off on decisions about image exchange and clearing.
Until joining Viewpointe, Harris had no image archive, and it has not begun to make images of consumer checks. But Harris Nesbitt Inc., the bank’s U.S. investment and corporate banking arm, does provide images to corporate clients.
Today, Harris clears checks through a variety of trading partners, including a network of direct exchanges, a clearing house in Chicago, and the Federal Reserve.
Mr. Wandolowski said he wants the same flexibility in imaging. “What we haven’t done is to lock ourselves in. A lot of the exchanges still have to be set up. I don’t think everybody knows who the partners are today.”
