With all the concepts being tossed around for the "Electronification" (of course, this is not a word, and it means lots of different things to different people) of the check, some are getting lost on the terms being used to describe these initiatives. In our first GSQ of 1999 (February) we will shed some light on this subject. For this Green Sheet, however, we are discussing one of the subsets of checks being electronified, and this is something bankers call check truncation. This means that the check is turned into an image at the earliest possible point (which could mean bank of first deposit) and is settled either by paper or by image, with the consumer receiving an image in their statement rather than the physical item. This, of course, is not a point-of-sale initiative, and does not involve retailers at all.
In 1995, 137 banks offered check images to their cash management clients, according to Mentis Corp., Durham, N.C. Among these were Bank of America, Fleet, Bank of Boston, Huntington Bancshares, Banc One, Harris Bank, Northern Trust, Signet, SouthTrust, Central Fidelity, First Chicago/NBD, Wachovia, and United Missouri Bank. Today, this number has doubled, and these banks hope to keep old customers and win new ones, possibly generate greater revenue, and potentially reap operational savings as processes formerly performed manually are either shifted to the corporate customer or handled more efficiently by the bank.
The reason why more banks havenít started offering this is that itís expensive. The up-front investment for a check imaging system for a large bank is approximately $2 million, for a smaller bank, $800,000. "What banks have to contend with is that imaging is perceived as a cost-reducing technology and in fact, it isnít," says Dick Poje, partner at Treasury Strategies, Inc., Chicago. "It adds to costs. It also adds to the quality of work, and throughput, and a whole bunch of other things, but it comes at a price, and until the corporate market is willing to accept that and pay for it, banks are going to be very reluctant to make that investment."
We will have much more to say on this in the first GSQ of 1999, but for now, we should all understand that the word "truncation" is tied to imaging in banking circles, and does not refer to the point-of-sale initiatives such as check conversion or RCK (represented checks).
