Bank Systems & Technology | Connecting The Banking IT Community

3/7/2005
10:02 PM

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As a result of the passage of Check 21, banks can exchange check images instead of the original paper checks. The question that remains is, "How?"

Check 21, in effect since October 2004, has made it possible for banks to present image replacement documents, or IRDs, to their counterparty banks instead of the original checks. But observers agree that IRDs are nothing but a stopgap, since the costs involved with creating, delivering and accepting IRDs are expected to bolster the business case for all-digital image exchange. It's the difference between sending someone an e-mail and faxing a message to a delivery service to be delivered by hand.

Unlike most e-mail, image exchange requires far more stringent controls in terms of the quality of the image data, the security and privacy of the information contained within, and the regulatory and legal considerations for both the sender and the receiver. That's why a number of image exchange mechanisms have arisen, in order to facilitate the participation of virtually every bank in the U.S. in image exchange.

However, it's still early days. Most banks are, at best, working with pilot volumes in order to test if their internal procedures are up to the task. Furthermore, the dearth of complete pricing information as to what it will cost to use each of the emerging exchanges in a production environment may add to the reluctance of banks to commit their check volume to any given image exchange. In turn, the exchanges may find it hard to set firm prices.

BS&T asked several check-processing industry authorities for their views on the emerging exchanges and the things to look for from the perspective of each of the major players. The general consensus on the players to watch: the Federal Reserve, Viewpointe Archive Services, SVPCo and the Endpoint Exchange Network. For each of these entities, we have compiled a "SWOT" analysis - Strengths, Weaknesses, Opportunities and Threats - presenting incisive (and sometimes subjective) comments from our panel of experts, in their own words.

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