Water, water, every where,
And all the boards did shrink;
Water, water, every where,
Nor any drop to drink.-Samuel Taylor Coleridge
The Rime of the Ancient Mariner
GonzoBankers, check processing technology is hot these days when i/wp-content/uploads// are involved (but we already have a Gonzo deer blind and do not need your old IBM 3890, no matter how cheaply you’ll sell it). According to the 2007 Federal Reserve Payments Study, the volume of checks (both written and paid) continues to be larger than debit card, credit card or ACH transactions. The report also shows that from 2003 to 2006 the dollar amount of checks increased from $40 trillion to $41.7 trillion.
We’ve been hearing for years that checks are dying, but to paraphrase Monty Python’s Black Knight: “They’re not dead yet!” Use of ACH and ARC technologies will undoubtedly continue to expand, and paper checks as a payment mechanism will continue to decline, but there is no end in sight for the traditional paper check.
Given that paper will be around for a while, how can banks be more efficient? Don’t even think about upgrading that 3890 that you can’t sell or give away! And there’s not much float left to be “reduced” — future check processing efficiencies will not come from there. But most experts agree that a fully automated imaged deposit should cost no more than about 25% of the cost of a human-processed deposit. So, you have to ask yourself: how many ways are there to reduce costs by 75%? Consider what advanced image-enabled check processing capabilities offer:
For these and other reasons, it seems every possible vendor is offering up its latest and greatest product for processing i/wp-content/uploads// instead of physical checks. These solutions promise — and deliver — huge gains in efficiency coupled with increased customer service, but those supposedly “minimal” costs can still blow a big chunk of a bank’s budget for just one of these new gadgets. What’s a GonzoBanker to do? While all of these products offer something for somebody, the magic is in knowing what will help your bottom line.
One Size Doesn’t Fit All
First, consider teller capture and branch capture. Start by knowing that the rules are different between the commercial banking and credit union worlds. Commercial banks process large deposits with huge numbers of deposited transactions, and their processes — and the automation that benefits those processes — are strikingly different from credit unions. Credit unions have historically been strong advocates of online, real-time processing, with transactions posted at the teller window while the member waits. (If there are any of them left, traditional thrift institutions – think passbook savings accounts here – resemble credit unions in their teller processes.) Their processes are not geared toward efficiency in processing deposited items, nor are they efficient in preparing not-on-us items for presentment elsewhere. Teller capture holds great promise for traditional thrifts and credit unions because it reduces transaction processing time at the teller window while preparing deposited items for processing with minimal handling.
But if you work in a commercial bank, forget about teller capture. Branch capture is where the payoff comes for commercial banks. Send that deposit to the back office for processing! What you already do — receipt each deposit “subject to verification” and send the customer on his/her way — is superior to teller capture. With little more effort than what is needed to microfilm checks, those items can be scanned, imaged, sent to a central site (in Bangalore?) for balancing and the i/wp-content/uploads// sent for collection. All this happens “behind the scenes” in each branch, ideally at non-peak-volume times. Fast! Easy!
With either teller or branch capture, bear in mind that online, real-time posting of credits may be a nice way to make deposited funds available immediately through all delivery channels (ATM, Internet, VRU, etc.) but it is not a more efficient way to process a deposit.
Where to get it: Teller capture should probably come from a teller system vendor, while branch capture should come from an item processing vendor (or maybe a vendor specializing in merchant capture).
Bring the Bank to the Business
Merchant capture continues to get lots of press — but it’s not right for all situations, either. Merchant capture, where a merchant scans checks as part of preparing that day’s bank deposit (think about a dentist’s office with significant check activity but little in the way of currency and coins to be deposited), is huge in the commercial banking space and but not used much in the typical retail organization, be it a credit union, thrift or even retail-oriented commercial bank. With merchant capture functionality, non-management employees can make the daily deposit since a detailed receipt of each deposit (including check i/wp-content/uploads//) can be provided at the time of the transaction. This can reduce or eliminate the need for separate night deposit bags and keys, transparent depository bags, working those night deposit bags under dual control, etc., and can lessen the need for internal depository reporting in the merchant’s shop.
With merchant capture, item i/wp-content/uploads// are sent to the bank electronically, with the software adding the necessary “deposit slip” so that the proper account receives credit for the deposit. Here’s a little secret some financial institutions may not know: commercial accounts are not given full credit for a deposit until sufficient time has elapsed for the deposited items to clear; accepting checks for deposit is a credit decision, just like making a loan. In fact, it IS a very short-term loan, since the merchant’s bank cannot be assured that the items deposited will ultimately be collected. Can you see the potential for fraud rearing its ugly head? In the world of imaging, just as in traditional commercial banking, merchants are required to keep enough money in their account to cover “uncollected” deposits until they have had time to clear. This need will not go away, even when check i/wp-content/uploads// clear in hours instead of days.
Where to get it: Merchant capture systems are usually an outgrowth of item processing systems and can be acquired from item processing vendors, but merchant capture can also be one component of a lockbox processing system.
Reaching the Outliers
Consumer capture allows retail customers to electronically scan and deposit checks from home (or any other location with a PC, a scanner and an Internet connection). It provides simple-to-use functionality for consumers and, done well, does not compromise fraud prevention, security or processing quality. As with other imaging technologies, consumer capture employs image and character recognition capabilities to read amounts and account information, verify consumers’ deposited check i/wp-content/uploads// in an automated fashion, and present deposited items for payment via “Check 21” channels. As with merchant capture, this technology can attract new customers without regard to geographic constraints, accelerating the bank’s expansion beyond existing brick and mortar footprints. It typically uses the bank’s online banking portal, leveraging existing security controls for login IDs, passwords and data encryption.
USAA Federal Savings Bank, with very few physical locations to serve its clientele of military personnel deployed worldwide, has been one of the first to embrace this technology, but any bank or credit union with a widely dispersed customer base should find consumer capture attractive. If your customers are primarily located in a single geographic area, consumer capture is probably not a big winner for you.
Where to get it: The best source for consumer capture systems is unclear at this time — item processing vendors tend to have the best image processing functionality while home banking systems usually have the best Internet banking integration. Fiserv’s CheckFree division recently announced a major strategy for consumer remote deposit capture.
ATM capture and kiosk capture will benefit most financial institutions, but even here one is more generally applicable than the other. Only depositors with large numbers of deposited items or significant amounts of currency and coin to be deposited are not well-served by ATM and kiosk capture.
ATM capture is particularly cost-effective. Image ATMs combine the same technology developed for other image item processing products (courtesy amount read, MICR line scan, electronic presentment of items, etc.) with currency-handling capabilities to fully automate routine deposit-taking and cash withdrawal functions.
Kiosk capture, long envisioned as part of “the branch of the future,” is where customers come into the branch and use self-service terminals in lieu of interacting with human tellers. As with lobby model ATMs (e.g. ATMs with no secure surround), there is a place for this technology in high-volume locations, but when a customer is coming to the branch anyway there is not as much benefit from automation as when a freestanding, offsite imaging ATM can substitute for a small branch. We see credit unions using this technology for small locations (e.g. a plant or hospital) where they want to operate with a sales person but not the cash drawer of a teller.
The banking world is awash in check i/wp-content/uploads//, and with all of these image technologies, deposited items can be sent to the financial institution they were drawn on virtually untouched by human hands! While an individual bank’s ROI will vary based on the type of institution and type of transactions it typically processes, there is no question that significant efficiencies are possible. But — as with most things in life — it is important to do the right thing at the right time. Each different point of capture fills a different strategic and operational need. Banks need to be prioritizing their image capture road map based upon their business strategy and their critical customer needs. Image away, GonzoBankers!