An Image Is Worth 1,000 Paper Checks

Though some banks have been slow to embrace Check 21, Savings Institute Bank and Trust ($624 million in total assets) already has half of its branches imaging checks and processing them electronically. The Willimantic, Conn.-based bank began truncating paper checks more than 10 years ago, according to Donna Irish, Savings Institute's VP of project management.

"As we add more branches, check imaging will provide more efficiency," says Irish. "It will help us cut the cost of delivering paper images to our core processor and check processor, COCC."

In October 2004, Avon, Conn.-based COCC approached Savings Institute about participating in a beta test that would allow COCC to exchange the bank's check images with the Federal Reserve electronically. "We used to accept checks at the branch, batch them and send all paper checks to COCC to process," Irish explains.

Recognizing the benefits, Savings Institute installed an interface at the end of 2004 that allowed the bank to interact electronically with COCC's AFS software platform, which captures images at COCC, assures the image quality and assembles the outgoing cash letter on behalf of the bank. The AFS platform also makes the images available for online research throughout the bank's branch network.

In January, the bank began installing Canon (Tokyo) CR180 scanners and decided to use its existing secure, high-speed T1 line to encrypt and transmit data to COCC's processing center. The first branch went live in May.

"Now, we create a digital image of the check as it is accepted at branch level," Irish explains. Savings Institute transmits these images to COCC in real time via its T1 line. COCC electronically encodes and balances each branch's transaction totals and forwards the imaged information to the Federal Reserve through the FedForward Image Cash Letter Deposit service. This outgoing image cash letter hits the Federal Reserve bank and typically is deposited within 10 minutes.

Better, Faster, Stronger

Irish says she pursued the project in hope of gaining a faster rate of item clearing, as well as faster availability of funds at the Federal Reserve. The bank will feel stronger impacts in these areas as the industry's image exchange volume ramps up, she relates.

"We are already eliminating all holdover, increasing next-day availability to virtually 100 percent and meeting the Fed's earliest cutoff of 8 p.m. - this is regardless of weather or traffic," Irish says. "In the near future, we will reduce our per-item costs as more electronic receivers of images come online."

COCC expects the operation to provide a return on investment in 16 months to 18 months. And, as more financial institutions sign up for image receipt, substitute check volume will decrease, Irish notes, further reducing costs.

To date, nine of the bank's 16 branches are delivering check images to COCC electronically. The bank hopes to have all branches live by August. Savings Institute also is evaluating a merchant capture program that will enable commercial customers to scan their own check items and electronically send deposits to COCC. "An image capture device is housed at the commercial customer's main office," explains Betsy Didan, COCC's document processing manager.

Snapshot

Institution: Savings Institute Bank and Trust (Willimantic, Conn.).

Assets: $624 million.

Business Challenge: Improve efficiency of check-processing operations.

Solution: COCC's (Avon, Conn.)

AFS image-capture platform.