Check 21 Speed Bumps

By Mark Brousseau

With the banking industry seemingly speeding towards electronic check clearing, it’s easy to forget that there are some speed bumps along the way. I asked Clint Shank (cshank@sortlogic.com), president of Omni-Soft, Inc., the parent company of SortLogic SYSTEMS, what he saw as the biggest obstacles that financial institutions are facing as they migrate to electronic clearing. His response: the fact that paper checks are still being issued, and that most legacy capture systems won’t get replaced anytime soon.

Shank noted that most businesses – and some individuals – would continue to issue paper checks for the foreseeable future, a fact that is backed up by myriad studies. And while printing substitute checks or image replacement documents (IRDs) to process in-clearings is not cost prohibitive, it’s also not cheap. Similarly, Shank believes that most legacy check capture systems still have substantial value on the books, and many financial institutions have a big investment in staff focused on using and maintaining these systems.

“The replacement cost for a system that handles both paper and electronic payments is steep, in terms of dollars, resources and time,” Shank noted. “The cost to upgrade a legacy system to process electronic payments may be more affordable, but nonetheless, is still pretty pricey. Moreover, with the consolidation in the solutions provider market, it is now possible for the unwary to put money in their competitor’s pocket by investing in an upgrade to an existing legacy system,” Shank added.

So Shank believes the real hurtle that financial institutions must overcome is how to protect their investment in their legacy capture system, while still moving toward check truncation. “This is a game played on a knife’s edge, where any miss-step can provide costly,” he said. “Perhaps this is why new services like remote deposit capture and Back Office Capture – which can be added without compromising this delicate balancing act – are so highly favored.”

How are your financial institution’s legacy systems impacting its electronic clearing initiatives? E-mail me at m_brousseau@msn.com.