Check 21

In preparing for The Check Clearing for the 21st Century Act, which went into effect on Oct. 28, banks had to rethink their check processing and the technology needed to support it. The lessons they've learned are reshaping their enterprisewide operations - and the industry.

Q. How did your organization prepare for the Oct. 28 Check 21 deadline? How far in advance did you begin planning for compliance?

Alok Ahuja, Union Bank of California: In the fourth quarter of 2003, our Payments System Strategy Steering Committee approved our Check 21 project management structure, which has representation from across the enterprise. The committee made sure that the bank was ready to comply with the act, allowed for a timely response to internal and external impacts, and allowed the bank to prioritize and allocate resources and mitigate risks to our ongoing operations. The committee also determined and explored new ways of bringing value to our customers. We wanted to ensure that the bank did not just comply with the law, but took advantage of the law. We also established the Check 21 program manager and Check 21 operations director positions.

Mike Porter, UMB Bank: UMB Bank began assessing the impact of Check 21 immediately upon announcement of the proposed legislation, and we refined our approach as details were finalized. An oversight committee was formed involving key management team members from operations, compliance, retail, commercial, marketing communication, education, legal and correspondent banking. This group was charged with directing the company's approach to educating clients and associates, as well as addressing operational and product-delivery impact. We engaged J.D. Carreker and Associates to present a Check 21 industry overview to the management team and evaluate the company's overall preparedness.

Richard Winston, Accenture: Some banks are taking a wait-and-see approach. Others are taking baby steps by strategically using image replacement documents-based solutions. Still others, including many of the top 20 banks, are seizing the opportunity to not only prepare for Check 21 implementation, but also to rethink the economics of their back-office factories and capture strategies.

I believe the latter is the superior strategy. Many banks have been preparing for conversion to electronic check processing since the late-90s, focusing mostly on image-enabling check processing sorters and archive building or sourcing. Planning accelerated following the events of Sept. 11, 2001, when check processing virtually froze for days while planes were grounded. Declining check volume and improving technology solutions also accelerated preparations.

Jane Darga, Comerica: We were one of the first banks to invest in image technology more than a decade ago. As the Check 21 legislation moved forward, Comerica established a program office that coordinated various Check 21-related activities, which helped provide the foundation for the enablement of an image exchange payment process. Comerica documented business strategies, identified business requirements, selected vendors and third-party processors, and created a communications team for both internal and external customers.

Q. In what technologies did you invest in anticipation of Check 21? Did this require changes to your existing check processing platform?

Mark Migliaccio, Union Bank of California: We invested in several new systems in the item processing world, and we're in the process of implementing them now. First, it was necessary to image-enable our Day Two operations in preparation for image exchange. We're currently in the process of image-enabling our exceptions, outgoing returns and incoming returns processing areas. We are an owner of SVPCo and plan to participate in exchanges with other SVPCo members and non-members through this network. We've installed and are testing a distributed traffic agent, and we are working on installing a new system within item processing to facilitate image exchange.

Porter, UMB Bank: Our project plan calls for replacing all IBM 3890 high-speed check capture devices with NCR 7795s, utilizing NCR's Transaction Manager platform. In order to send and receive images, we will employ VectorSGI's Image Exchange module, which enables the creation of Forward Collection Image Cash Letters in the prescribed X9.37 format as well as the ability to receive image files for On-Us Inclearings.

Darga, Comerica: Accepting a substitute check required few technology changes at Comerica. Enabling an image exchange process, however, required enhancements to the following areas: incoming return processing, exceptions processing, image archive, research and adjustments, check processing and statement rendering. We decided to upgrade our systems to take advantage of efficiencies that can be gained through an image exchange payment process.

Q. How did you educate employees about Check 21? What measures did you take to educate consumers?

Ahuja, Union Bank of California: In December 2003, we conducted an internal two-day workshop to get everyone in the company up to speed on Check 21. Our bank also hired the services of BearingPoint to help us train some individuals within the organization, and we had a self-paced course on Check 21. This course was a requirement for our 400-plus customer service and call center employees. In March, we did a series of seminars across the state of California for our business clients. The events covered the law and how it will impact our clients' businesses. We educated our consumers through statement inserts and other communications methods, but we met with business customers face-to-face.

Porter, UMB Bank: We developed an online Check 21 module administered via the corporate Intranet for the general education of all company associates and a specific, detailed training application for frontline tellers, personal banking representatives, call center associates and other customer contact personnel. Our staff has been trained to answer any and all anticipated questions related to the impact that this legislation may have on a customer's check-writing and deposit activities. We have also placed educational information on our Web site for easy reference. Statement inserts describing Check 21 and our readiness were created and delivered in all consumer and commercial statements during September and October cycles.

Winston, Accenture: Some banks are being very creative - using Check 21 as an opportunity to reach out proactively to customers as part of their customer retention strategies. Generally, banks have tried to warn customers that checks may be processed - and funds accessed - faster than traditional physical processing.

Darga, Comerica: The communications team at Comerica developed a number of tools to help prepare customers, employees and media for Check 21. This included proactive communications with employees through our internal newspaper, periodic updates on our Web site, a Q&A brochure that was mailed to all account holders, internal and external Webinars, speaking engagements at conferences and associations, articles in the press, a talking-points brochure for our lenders, targeted marketing messages, e-mail communications, customer letters and more.

Q. What lessons did you learn while implementing technology for Check 21? How will this drive future check/payment-related actions?

Migliaccio, Union Bank of California: Check 21 is an evolutionary, rather than a revolutionary, process. Changes aren't going to happen overnight. Although we're still learning, we've learned that it will be crucial to institute advanced fraud detection mechanisms throughout the banking industry. We also learned some lessons on what to do better next time in terms of reengineering our internal systems as we get ready to exchange check images.

Porter, UMB Bank: The key lessons haven't changed as a result of Check 21 - proactively gather information about the needs of customers, industry initiatives, legislative changes and advancing technology. We use this data to analyze our current offerings and how they might be altered to better serve existing customers and attract new ones while driving costs lower.

Alok Ahuja, Check 21 Program Manager, Union Bank of California (San Francisco)

Mark Migliaccio, Check 21 Operations Dir., Union Bank of California (San Francisco)

Mike Porter, EVP, Operations Administration, UMB Bank (Kansas City, Mo.)

Jane Darga, VP, Treasury Management Services, Comerica Bank (Detroit)

Richard Winston, Partner, Accenture (Dallas)

Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio