JPMorgan Chase (New York, $1.16 trillion in assets) has introduced ACH Distributed Payment Capture, a remote deposit capture solution that allows businesses to convert consumer payments to either Automated Clearinghouse (ACH) transactions or to substitute checks.
Checks that are converted to ACH transactions can do so either using the Accounts Receivable Conversion (ARC) or point of presentment (POP) codes. For those checks that cannot be converted to ACH, the provisions of Check 21 allow for the creation of a substitute check.
The combination of ACH conversion with Check 21-enabled remote deposit capture makes for a promising combination. "Prior to Check 21, if we didn't have a local presence, our client would say, 'We'll do business with you 80 to 85 percent for ACH, but we're going to have to hire a local bank,'" says Alan Koenigsberg, vice president and Global ACH senior product manager, JPMorgan Chase. "Now, we can turn that 15 percent on, and we can handle those remotely."
Furthermore, JPMorgan Chase's ability to offer a single solution for both ACH and check conversion has its advantages in head-to-head competition with other banks. "Some of our competitors in the industry have their check folks compete with the ACH folks," says Koenigsberg.
But in the emerging business of distributed payment capture, it's not just the banks that are in the running. "I'm competing against Purolator [Courier Ltd., of Mississauga, Ontario] and companies you would never expect to compete with," says Koenigsberg. "The whole value chain is becoming unglued."
With banks such as JPMorgan now having the ability to go "out-of-footprint" to serve business customers, smaller banks face a difficult decision: Either invest in the imaging and ACH technology required to compete, or outsource. As it happens, JPMorgan Chase has the capability to provide back-office services to support regional corporate treasury players with strong local business ties. "They have the relationships and, potentially, the credit relationships," says Koenigsberg. "We'd potentially want to white-label as the utility behind the bank."
Yet shifting back-office infrastructure to a former competitor could be a difficult move for bankers still fixated upon the need to "fill the factory," or "to be the last guy around on the block processing checks while everybody else is out of it," notes Koenigsberg. "When you get beyond that, it could be a very good business."