Check 21: Check Clearing For The 21st Century

By Carey Richardson
Events & Marketing Manager
StartABank.com

As technology progresses and becomes more readily available, bank management are faced with a difficult decision; accept the changing environment and implement the technology consumers have come to accept, or ignore it and risk losing your place in a competitive market. The former, known as adaptors, realize that the only way to compete is to stay ahead of the curve. The latter, known as adopters, traditionally bring up the rear, implementing products and services only after they have become standard for the industry. In previous years many smaller institutions were adopters, because they didn’t have the money or resources to be proactive in their implementation of products and services. Today, however, we’re seeing a shift in mentality, whereby small banks are taking steps to enter a playing field that was once considered out of their league.

Though there are still individuals who perceive the 7,675 banks in this country with under $10 billion in assets to have little impact on financial giants such as Wachovia and Bank of America, technology is poised to change that. Products and services available today, including core data processing, check imaging and processing, ATM and debit card processing, platform solutions, information security, and data communications management, are making it possible for these institutions to provide everything offered by the industry giants, and superior customer service to boot.

By successfully integrating advanced technology and functionality into their day-to-day operations, small banks are able to meet the demands of their customers and compete effectively in today’s market. Such technology, which gives customers access to their financial information wherever and whenever they want it, enables financial institutions of all sizes to provide competitive products and services. Outsourcing, the delivery of high-tech products and services through a third party provider, makes it possible for institutions that lack the in-house resources to provide their customers with the same high-tech products and services offered by larger corporations.

Outsourcing increases operational efficiencies, improves competitive positions in the marketplace, and boosts bottom-line profitability. Current trends indicate that outsourcing in the financial services industry is growing at a rapid rate, along with the dependence of financial institutions and merchants on technology. The most common form of technology utilized by today’s financial institutions is online banking, with over 100 million households worldwide currently accessing their accounts over the Internet, and an estimated 50 million U.S. households by 2010. But the growing trend towards check imaging is where the smaller institutions can gain a competitive edge.

The almost certain passage of Check 21 legislation (Check Clearing for the 21st Century Act, formerly the Check Truncation Act of 2003) this year should be a wakeup call to community banks and those in the check processing industry. By the end of 2004, the promises of check imaging will not only be possible on a widespread basis, but will be necessary for financial institutions to remain competitive. Check 21 will remove certain legal obstacles and facilitate the use of check truncation and electronic collection of return checks.

The goal with check imaging is to empower back office operations in order to improve customer service, increase productivity and decrease the operating costs associated with labor and postage. Check 21 will allow the processing industry to revolutionize check transactions by speeding up the collection of checks, improving availability of funds, reducing fraud losses, and lowering collection costs like never before. Additionally, it gives customers the convenience and flexibility of viewing cleared checks via a PC connected to the Internet, or from a link on an institution’s web page. Since the trend today is taking us toward paperless environments, that means community financial institutions will turn to more efficient statement delivery channels such as CD-ROM and email.

Providing an advanced Internet-enabled image retrieval service helps you stay ahead of the competition and differentiates your financial institution by providing a powerful value-add product that can help increase customer loyalty and bottom-line profitability. NetImage, an Internet-enabled retrieval service, and eVue, an electronic monthly statement delivery process, both developed by InterCept, are two such products. With NetImage customers have the convenience and flexibility of viewing cleared checks via a PC connected to the Internet or from a link on an institution’s web page. With eVue, institutions can painlessly transfer publishing and distribution to the Internet, giving customers the ability to log-on to a secure website and receive a detailed online statement of their account. Every check is hyper-linked within the statement for fast, easy retrieval – customers simply click on a statement item and the check image is instantly displayed.

Another competitive technological tool, Customer Relationship Management (CRM), integrates all areas within a financial institution that touch customers including sales, marketing, customer service and field support. A successful CRM program puts detailed customer information at the fingertips of virtually everyone in a bank. Additionally, CRM enhances customer interaction by integrating the flow of customer information between an institution’s core accounting system and front-line deposit and loan platform systems, which helps attract and retain customers while enhancing sales and service management and data mining. When used correctly, CRM capitalizes on customer relationships by proactively monitoring that relationship to anticipate customer needs.

Though much of the technology available today is utilized by financial institutions at their own discretion, in some cases, legislation dictates the decision-making process with respect to implementing new technology systems. The Gramm-Leach-Bliley Act (GLB), signed into law on November 12, 1999, requires all financial institutions to utilize safeguards to ensure security and confidentiality of customer information and prevent access to such information by unauthorized persons.

Boardershield, a program offered by InterCept, enables financial institutions to proactively manage their information security needs and regulatory compliance issues through a suite of technology services and reporting tools. Boardershield creates a virtual shield around valued information, and identifies weaknesses in current systems. Round the clock monitoring and steel-walled safeguards help protect against malicious attacks or inappropriate use of information, providing the safety and security the federal government requires.

In today’s technologically-driven marketplace high-tech services are no longer an option, they are a requirement. Financial institutions that implement technology into their day-to-day operations will be able competitors regardless of size because they have the ability to provide the security and convenience customers expect when they expect it. Those that don’t will eventually be forced by both the federal government and consumer demand to implement technology into their business plans, but at what cost? Outsourcing has made technology readily available to institutions of all sizes, taking advantage of it will enable you to serve your customers now and in the future.