ASSEMBLING A COMPLETE IMAGE PROCESSING SOLUTION

By Joe Lockwood, First Vice President/CTO, COCC

With fanfare, fireworks and speeches, Check 21 and all-image processing have been heralded from sea to shining sea. Now that October 28 has come and gone, the financial industry is waking up to the inevitable morning after.

Through the haze, bankers believe there are substantial savings in end-to-end image processing. By end-to-end image processing, we mean the entire check image process, from initial check deposit to statement delivery.

To realize the savings, bankers also know that fairly substantial investments are needed. The question for management and the bank’s board is which investments and how long before they pay off.

Details!

It’s time for the details. As COCC examined end-to-end image processing, we found that most vendors and financial institutions have yet to realize the full extent of components and process involved. This is because each vendor sells its own piece of the overall image process, and the financial institution is left to assemble a complete end-to-end solution.

To assemble the complete picture, COCC suggests that banks construct three models: Product Workflow, Reconciliation, and Financial Analysis. Completing the models will bring the bank closer to understanding the full extent of changing to all-image processing. Vendors can serve as key allies in this effort once they know that you are seeking a complete solution.

The following is a brief description of each model:

Product Workflow Model

This end-to-end workflow shows the complete check image process at each stage. This includes branch capture, the processing stream at your check processing facility, research and archive of outgoing items, the image exchange, image inclearing, research and archive of incoming items, and image statement rendering. If you intend to use third parties to convert your checks to images and process image cash letters, use those third parties to help you thoroughly understand the processes and costs.

Reconciliation Workflow Model

The reconciliation model demonstrates how transactions will be captured and batched within each branch, how images will be repaired if necessary, reconciled, adjusted and quality assured.

It may be a good idea to establish an on-line notification process to verify that each branch’s batches have been received, reconciled, quality controlled and totals forwarded to Endpoint Exchange, the Federal Reserve or SVPCo. These steps are critical in supporting the bank’s next day settlements with the exchanges.

Financial Analysis Model

Each bank should develop a financial spreadsheet to calculate total investment of branch capture/image exchange plus new operating costs such as image presentment, encoding and image reject repair. Offsets to these costs include reduced operating expenses such as courier, microfilm, and item processing supplies. The spreadsheet should also factor in cost reductions of traditional check clearing charges vs. image exchange charges. 

Initial findings from COCC’s analysis of current client banks show a monthly savings of up to 35% and a total return on investment within 12-14 months. These estimates include system installation, training and time needed to re-engineer check processes. The estimates also assume 100% image processing and periodic mailing of non-image items, such as U.S. savings bonds and foreign collection items. You’re looking to eliminate courier!

Next Steps

Many of the new functions involved in end-to-end image processing require equipment as well as agreements with the appropriate image exchange, archive and courier vendors.

Because multiple vendors are needed, it is critical to understand how the systems interconnect. Some will be compatible with other vendors’ products. Some will not. Govern your selection process by the quality of the overall result rather than the quality of each component.

Test your new workflow by running each step with the personnel and vendors involved. You will find sub-steps and components you hadn’t anticipated as well as processes that will change dramatically as a result of image technology.

Finally, take the time to thoroughly train your staff. Because check processing has been “automatic” for so long, your staff has more habits to “unlearn” and more opportunity for regression. Involving them in the re-engineering process can help tremendously in explaining as well as selling them on the new world of check image processing.

Release

Release to your customers is the culmination of your hard work. The market should reward you for thinking the process through and having a well-trained staff to execute each step. Behind the scenes, your reductions in operating cost should reward your balance sheet while delivering the next level of customer service.