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Check 21 May Push EBPP over the Hump

Check imaging may be the service that pushes EBPP beyond the tipping point to mass adoption.

Electronic bill presentment and payment (EBPP), yet to reach the level of adoption that many analysts predicted over the past few years, should indirectly get a major push in the right direction from Check 21, according to speakers at the recent roundtable "Check Imaging: Moving from Vision to Reality," sponsored by Celent Communications (New York).

"Getting people disassociated with the paper," referring to statements and bills, "is the first step towards gaining greater acceptance of the 'electronification' of banking," according to Jay G. Fitzhugh, senior vice president at Provident Bank (Baltimore, $5.01 billion in assets). And with most banks preparing to image all checks, customers will be one step closer to fully embracing electronic banking and EBPP.

Imaging Is A Hit

At Chicago-based Bank One ($283 billion in assets), executives were "blown away" at the adoption rate of customers who wanted to view check images online once the bank offered the service, according to Christopher Nehrbauer, vice president, check strategy. "When we put the capability in front of the customers, the response (numbers) blew them all off of the charts," he said.

Nehrbauer said that not only do many customers like check imaging, it reduces costs and processing time for banks, and it is also a fraud deterrent. "Fraud detection is a huge benefit of check imaging," according to Nehrbauer. "Once the customer has access to the image, which is also an added convenience, check imaging really becomes a deterrent to fraud." Also, imaging will also move banks towards more real-time transactions, such as faster funds availability-another customer-service plus.

However, warned Nehrbauer, check imaging technology that goes along with EBPP must be very reliable. "Imaging has to be bulletproof and run like a watch," he said. "If it isn't, you are not going to get the level of adoption that you want." To that end, Bank One is making imaging technology vendors guarantee service uptime, or risk getting smaller paychecks. "We make vendors guarantee service uptime in the contract," he said. "By doing that, we weed out the vendors that are bluffing about the reliability of their technology," adding that in most cases if a vendor is willing to write performance guarantees into a contract, more often than not the technology is reliable.

Imaging Spending Jumps

Making sure that the technology is working correctly will go a long way to winning over customers from paper to electronic presentation. Also, with banks looking to spend much more money on imaging and presentment functionality over the next few years, institutions cannot afford to invest in faulty technology.

According to Alenka Grealish, banking group manager at Celent Communications, banking institutions will spend more than $500 million this year and a little less than $2 billion in 2005 on check imaging technology.

Also, banks will want to cut even more cost out of the check processing equation as the number of paper checks drops over the next few years, Grealish said. Some of the drivers behind the trend, according the Grealish, are declining imaging solution costs and the continuing increase in paper costs. And as check processing volumes continue to fall at a rate of about five percent a year until 2006, the unit cost for processing checks will rise.

According to Celent, currently banks spend between $6 billion and $8 billion annually on check processing. Bank One estimates that with a check processing volume decrease of a steady two percent over the next four years, banks will be left with a 50 percent excess in check processing capacity, in terms of readers and sorters.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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