Two payments executives say a new standard for image exchange could stall the industry’s shift to image clearing.
“We don’t want to do anything to jeopardize the momentum that we have behind image exchange,” said George F. Thomas, an executive vice president at The Clearing House Payments Co. LLC, one of the nation’s major check-clearing intermediaries.
Banks began clearing checks with images in 2004, and volume has grown steadily. The Clearing House reported earlier this month that check image volume over its SVPCO Image Payments Network in May topped 50 million, a 44% increase from April.
Until now, banks have formatted their image-exchange files using a technical standard known as X9.37 to define the data contained in the files. However, that standard is set to be superseded by a new one called X9.100-180, which has been under final review by the American National Standards Institute Inc. ANSI’s public-comment period ended Monday.
The Federal Reserve System has said it expects it will be 2008 before most major banks and processors convert to the new standard.
Mr. Thomas said he thought it would be 2008 “at the earliest,” and he urged an industrywide discussion to determine when, or whether, to switch to the new standard.
“We’ve got to get a group together and see how can do this in a logical, orderly manner,” he said. “There’s no critical need to put that format in today.”
The new format changes all but three records in the format, requiring significant change and expense, he said. The Clearing House, which is based in New York, argues that the standard should not be promoted for use before the industry agrees it is ready to adopt it widely, and one key rulemaker agrees.
“SVPCO is correct. We’re just getting up on 37. The Fed is using 37, SVPCO is using 37,” said Phyllis Meyerson, a senior vice president at the Electronic Check Clearing House Organization. She said confusion over the technical issue could hamstring efforts to convert to image clearing.
“It doesn’t take much to stall the industry. It doesn’t take much to make people say, ‘I have to wait,’ ” Ms. Meyerson said. “We need to keep moving forward, and moving forward at the moment is moving forward with X9.37.”
Even though the official standard is set to supplant X9.37, the older draft version will remain in wide use, she said.
“We’ve got vendors telling banks, ‘I’m going to wait for the new standard.’ It’s not helping anything,” Ms. Meyerson said. She noted that the current specification will still be used. “It will not be an ANSI standard, but it will be a sellable standard. It will continue to be available for distribution.”
“There’s a lot of good stuff in the new standard, but it’s a ways away,” she said. “Everybody needs to be on one page.”
Mr. Thomas argued that the industry could decide that the existing, draft standard is adequate. For instance, he said, although the new standard introduces a number of useful records to describe different kinds of data, they are not universally in demand now and can be used without adopting the new standard.
He said there were similar concerns several years ago over standards for authentication and the management of data-encryption keys, when banks began writing computer code while the official standard was still under review.
“We never did implement the final version,” he said. “There was no business benefit to switch.”
