“You say your image is new, but it looks well tested.”
–The Kinks, Misfits
I think it’s fair to say that despite the prognostications of several people (me included), Check 21 implementation was very deliberate (read “slow” here) in 2005 and 2006. As we look at the 2007 project lists at banks, almost every one has a focus on check conversion technology. It’s time to take another look at the various strategies being put in place out there and discuss what happens next.
First, some background. There are several concurrent movements in check conversion, each very different in purpose and process involved, but at the same time part of one big Check 21 picture:
Every core and branch automation vendor I talk to has some branch capture solution in the quiver. Alogent Vsoft and AudioTel are three examples of solutions for branch capture that can be obtained directly, and Benchmark Technology is an example of a vendor that has a solution for teller capture (by definition, teller capture systems have to be very tightly integrated with teller systems).
The first benefit of this is obviously that if all the checks are read/converted with no customer disputes, it isn’t necessary to take the checks out every day. This is good stuff, particularly with off-site ATMs where courier runs can be reduced. Second, the end result of being able to get the customer faster availability on the funds will ultimately mean that customers will increase the use of ATMs to make deposits. Ummmmm… more on that one later. Major ATM vendors (Diebold, NCR, et al) have integrated this capability into newer models, using either their own software or a third party solution like Wincor Nixdorf.
Whew! By my count, that’s eight distinct strategies and deployments that in one way or another affect branch delivery, and I didn’t even start factoring in lockbox, ARC, merchant check-to-ACH conversion, and several other burgeoning ideas to kill the paper check.
So what’s a bank to do? First, let’s recognize that this is all very much in the early stages, and it’s not at all clear what solutions will get traction, what customers will really want to use, and what this means to the timing of investments and the ROI. To help sort this out, let’s first create a list of questions banks should be asking about check conversion. Then, I’ll give you my early impressions and suggestions.
Questions banks should be asking:
Some of you have a pretty straightforward ROI for branch capture. Particularly for off-site ATMs and remote branches, if the implementation of ATM or a branch capture solution can eliminate one courier run a day, you’ll get back your investment in 18 months tops, and probably less. That’s the low-hanging fruit you should get right away.
Many of you are debating the right order in which to make investments. Merchant first? Branch first? Concurrent? My early take is that even though some of the investments in merchant capture may be a bit reactive at banks, it is still the best one to do first. One benefit of this is that banks can see how much check volume is taken out of branches completely before they undertake a large-scale branch project.
While there is about 10 times as much focus on branch back office capture as there is teller line capture, it’s possible that teller capture may actually be the better option at some banks – real time, low check volume shops may want to take a look at this option. Even if you go with the back office option, don’t do so without at least understanding what teller capture is – the process differences, the cost differences and the payoff differences. I think there may be a Betamax/VCR element to these two options right now – the much higher focus on branch capture may not actually be due to it being that much better a solution. Time will tell.
There is a feeling in the industry right now that in-branch, self-service units might be preferred over tellers by customers. I don’t get why. If I go to the trouble of walking into a branch, will I really use a self-service machine when a smiling teller is ready to help me? My guess is that there might be one real benefit from what I would term the Southwest Airlines/Home Depot factor. When you go to the Southwest check-in counter, you look at the line waiting to get to a human, look at the line for a self-service unit, and pick the one that will be the fastest at that time. The same may happen in branches, which means that with correct deployment (location in the branch, ease of use, etc.), these units may act as the solution for serious peak times. Not a bad alternative, in some cases, to a prime time teller.
I don’t think the new ATM deposit capability is going to increase customer use for these transactions unless it is accompanied by a very strong education effort by the bank that includes making clear that the customer will get credit as soon as they would from a teller. I wonder if that should really be a top-line focus right now.
“If I could change anything, then I would change everything.”
–Nine Days, Bitter
The bottom line here is that once in a while you get an opportunity to make a technology investment where the payoff is pretty obvious and straightforward. If you spend the money on the investment, some other cost will go away. Any of these types of capture may be such an opportunity in 2007. If it is, think through the big picture, make the investment part of an understanding of your bank’s overall capture strategy, and get on it.
Cornerstone Advisors can work with your organization to devise a Strategic Technology Plan that outlines how existing and new technologies can work hand-in-hand with your business processes and point to a competitive and profitable future.
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