Check Processing Gets A New Image

A list of the world's thinnest books would surely include "Successful Banking Industry Joint Ventures." The industry is full of examples of consortia that have vanished into thin air.

Yet one venture that's appearing to defy the odds is Viewpointe Archive Services, a check imaging service formed by J.P. Morgan Chase, Bank of America and IBM. In its first year of operation, Viewpointe amassed over 10 billion check images, or one in every five checks written in the United States each year. The company expects to load an additional 13 billion check images by the end of the year.

"We are currently adding 1 billion new images a month and have the capacity to continue adding significant volume to our archive," said John Lettko, CEO of Charlotte, N.C.-based Viewpointe Archive Services. "We are also servicing hundreds of thousands of retrieval requests daily."

The venture has benefited from the combined experience and clout of its bank owners, each of which spends well over a billion dollars a year on IT. "We have been able to quickly ramp up Viewpointe's technology so that today we house and provide instantaneous access to billions of checks written in the United States," said Lettko.

SunTrust Banks has taken an ownership stake in the company and is using its check archiving service. The service is also used by First Tennessee and HSBC.

"This technology will provide us an opportunity to further increase the efficiency of our processing and retrieval operations, while providing a valuable, convenient service to our customers," according to Ted Hoepner, vice chairman at Atlanta-based SunTrust.

While Viewpointe is focused on check imaging, its goal is to enable customers to leverage a national digital check archive for other documents as well, thereby reducing costs and increasing efficiency and speed associated with the storage, retrieval and exchange of many types of documents.

Unlike other joint ventures, many of which are solutions in search of a problem, Viewpointe is serving a real need. In the U.S., the check still reigns, accounting for about 60 percent of non-cash retail payments, despite the surge in credit and debit card usage. In no other country do checks account for more than half of all non-cash payments.

Because a big chunk of their revenues are tied to paper checks, banks have invested a lot in making processing operations as smooth as possible. "It has been tweaked," said Jeanne Capachin, a research analyst at Meridien Research. "We've got lots of products built up around it for corporate customers."

"But," she added, "it's very expensive. It costs a lot to process paper checks."

The biggest expense is the need to physically transport checks from one bank to another in the clearing process. The industry, both on its own and with prodding from the government, has taken steps to reduce this expense. Voluntary electronic check presentment (ECP) exchanges like SVPCo, while not eliminating the need to ship paper, have sped up check processing by capturing and transmitting MICR information electronically. And under the Federal Reserve's proposed Check Truncation Act, a bank could, at its discretion, transmit "substitute checks" (paper or electronic) to another bank in lieu of the original paper check.

Against this backdrop, the economics of imaging are compelling. Unlike paper checks, check images can be retrieved in just seconds via the Internet, reducing customer service calls and eliminating the wait for information. The ability to instantly access checks for handwriting and transaction comparisons reduces check fraud. Imaging also provides the means for sharing information between check processing and other systems, opening up possibilities for creating new services.

Those possibilities are helping turn check processing from a back-office operation into a test bed for new technologies. "I've been getting a lot of calls in this area," said Stessa Cohen, research analyst at GartnerGroup. "For an 'unhot' area, it's pretty hot."

Among the more significant of these new technologies, according to Cohen, are TCP/IP-the Internet-which facilitates image transmission; browser-based delivery, which eliminates the need for proprietary image viewers; and Java and other development tools for delivering check images to customers.

These technologies are readily available and don't require advanced IT skills. They also promise to replace hard-coded programming with customized, or "parameterized," programming. The parameterization approach, Cohen said, enables banks to establish unique workflows such as prime pass, prime high-speed image capture and reject re-entry, without the need for staff programmers or third-party vendors. "The custom-code approach boxes you in to a certain set of programmers. As opposed to the business manager or product analyst selecting parameters for a workflow," she said.

Rather than scrap their legacy systems in which they have so much invested, banks will migrate toward newer technologies, Cohen wrote in a research note. "Migration will reduce the up-front costs of replacing the legacy system, while enabling the bank to store the data in an archive."