Checks in a 21st Century digital world

By Glenn Wheeler, president, Viewpointe Clearing, Settlement & Association Services, Viewpointe

Is the check dead? You might hear a near-unanimous “yes” to that question; or as others might say more accurately, check usage is simply on a long decline. While check usage has been dwindling in recent years, to paraphrase Mark Twain, the reports of its death are greatly exaggerated. A recent study shows a sizeable segment of the market still writes checks.

As The 2010 Federal Reserve Payments Study, which looks at noncash payments in the U.S. from 2006 through 2009, indicates electronic payments are quickly outstripping check payments; yet checks have remained a significant payment instrument – to the tune of $31.6 trillion in value paid in 2009. While businesses far outweigh consumers in the total dollar value of the checks paid, consumers overall continue to write more checks, according to the findings. And, the study found that while the number of checks written overall has declined more than 7 percent from 2006 to 2009, the volume of consumer-to-consumer check payments has actually grown in that same time period, from 2.2 billion to 2.4 billion.

Where is the consumer-to-consumer check-writing trend heading? Despite its overall decline, there are those who continue to see the value in this traditional payment method. A January New York Times story, Social Security and Welfare Benefits Going Paperless, about the U.S. government’s decision to pay benefits electronically, chronicled how the elderly have continued to opt to receive old-reliable checks versus the government’s proposed electronic deposit of social security payments.

While this one segment of the population alone will not keep checks going indefinitely, technology might encourage some of the smartphone-wielding segment of the population to continue circulating them. According to a recent American Banker article, For Mobile Deposit, Banks Choose Speed-to-Market Over Simplicity, banks are rushing ahead with mobile check deposit technology at the behest of their customers who are using the technology to deposit checks without having to step foot in a bank.

As electronic payments technology continues to evolve – from mobile payment apps to “tap-and-pay” payments using near field communications (NFC), financial institutions and their customers can easily move into a new payments world. Embracing the budding technology will, no doubt, bring new challenges, but with ease of use and the promise of potential growth to the financial institution’s bottom line it could be a worthwhile investment.

Even in our digital age, the old-fashioned check may still stand up as a viable complement to the technologically advanced payment methods.

What do you think?

Maximizing RDC Payback

Posted by Mark Brousseau

Not getting the labor savings you expected from your bank's remote deposit capture solution? Wally Vogel, founder and CEO of Creditron, Inc. (wvogel@creditron.com) is not surprised.

"In instances where checks come in and are posted to accounts receivable, scanning the checks for the bank saves a trip to the bank, but does nothing to aid in reducing data entry, balancing, or exception handling," Vogel explains. "These are the time-consuming parts of posting and depositing payments, and they are not addressed by a remote deposit scanner from the bank."

Vogel adds, "What will save significant time is a complete remittance processing solution which can: scan remittance documents and checks, automatically recognize data to reduce key entry, balance the transaction, and perform look-ups and validity checks to handle exceptions quickly. Of course, a complete remittance processing solution also can update the accounts receivable system and deposit items remotely as well, without requiring the user to re-scan or re-key the checks."

The bottom line: the trick to saving time with remote deposit capture is to handle both sides of the transaction with a single automated solution, Vogel says.

What do you think?

New Check 21 Standards and Practices

Posted by Mark Brousseau

To prepare for the industry adoption of new Check 21 standards and practices, the Federal Reserve will be making changes to its pre-production (test) environment. These changes will not impact the production environment which processes Check 21 file deposits.

While these changes are being implemented, the Federal Reserve recommends customers delay or minimize testing between May 11 and May 18 until the changes are fully implemented and validated.

Beginning May 11, 2009, the Federal Reserve Banks’ test environment will be updated to include an expanded set of file validations on Image Cash Letter Deposits. Validation will be performed on a broader spectrum of fields and records, including TIFF image analysis. The expanded file validation will align Federal Reserve Check 21 deposit requirements with practices outlined in the Universal Companion Document (UCD) developed by the CheckImage Collaborative (http://www.checkimagecentral.org). The TIFF validation will align Federal Reserve Check 21 deposit requirements with ASC X9.100-181-2007, the Specification for TIFF Image Format for Image Exchange (http://www.X9.org).

With the May 11 implementation date, customers submitting test files will receive new and expanded file validation results. Test customers may notice an increase in the number of errors displayed by the File Acknowledgement Accept/Reject Notices. The validation results may require participants to make customer based parameter changes to their image or item processing software. Some may even require vendor contact or technical assistance. Any TIFF validation errors will be shared separately by Federal Reserve Bank implementation managers.

The Federal Reserve says it has been working closely with the Check 21 vendor community on this initiative. The Federal Reserve's plan is to monitor customer test results and industry adoption to ensure all participants are prepared for live implementation. All Federal Reserve customers will be provided notice of the production implementation date well in advance. Federal Reserve Bank implementation managers are available to work with customers who may need assistance in adopting the new validation practices and test changes to achieve compliance.

Deposits Will Be Critical in 2009

By Mark Brousseau

There’s little question that we’ll see continued economic change and upheaval in 2009. But Michael Pratt, chief marketing officer, Panini North America, says remote deposit capture (RDC) solutions create an opportunity for financial institutions (FIs) to defend and even acquire the ever-important Demand Deposit Account (DDA) line of business.

With tightened credit markets and higher regulatory and market scrutiny, domestic deposits have become even more critical for FIs. McKinsey estimates that payments represented $235B in FI revenue in 2006, or 40-50 percent of an average bank’s revenue, Pratt notes. Revenue related to DDA is typically 45 percent of this base, or 18-22 percent of an average bank’s total revenue -- highlighting the significance of payments and deposits to a bank.

Economic conditions have increasingly made deposits the “benchmark” by which FI health is perceived in the market, Pratt says, and is the driver of their ability to continue to facilitate financial transactions. “We have already seen major acquisitions based primarily on access to domestic deposits, so the ability of FIs to capture deposits will be very instrumental to their success,” he explains.

“Deposit retention and acquisitions programs are central to the well being of DDA related income to all financial institutions, resulting in a renewed prioritization for remote deposit capture,” Pratt says. “Distributed capture, after all, is at its core a strategic means of acquiring deposits while lowering operational & processing costs.”

Banks that take maximum advantage of this opportunity to gain new deposits and solidify customer relationships via RDC stand to gain the high ground in the war for deposits, he concludes.

What do you think? Post your comments below.