Putting Paper To Pasture

Faced with mounting evidence to the contrary, pundits have stopped predicting the checkless society. And for good reason:  Our nation's love affair with checks-we write more than 60 billion each year-continues strong. In a Fed survey conducted in 1995, however, 80 percent of the institutions surveyed agreed that more electronics are needed to improve the check collection system. Adhering to such sentiment, the Fed is promoting something called electronic check presentment(ECP) as a step on the path toward more frequent use of electronic forms of payment. ECP speeds up the transmission of the essential check-clearing information, while truncating the actual checks at the bank of first deposit, or delivering them later using cheaper methods of transportation. Widespread use of this system could reduce the collection costs now borne by banks and their customers and also reduce the losses arising out of check fraud. By moving the full MICR information much faster, ECP provides the paying bank with an early electronic warning that allows it to accelerate the return of fraudulent checks back to the payee. For ECP to make a dent in processing costs, more banks will have to truncate their customers' cancelled checks instead of returning them in the mail. Easing the transition to widespread ECP is one of the potential benefits of a different technology called imaging that the Fed is now deploying. In its basic form, this technology substitutes a digitized computer image of the check for the actual thing. Cameras mounted on check-sorting machines photograph each check as it moves through the sorter. The images are then stored on CD-ROM or magnetic tape. With check imaging, customers receive no cancelled checks. Instead, they simply call their banks to retrieve the images as needed-all in a matter of minutes. If they prefer, customers can receive monthly sheets of paper with 12 to 18 check images per sheet. Businesses can receive a CD each day containing all their checks that cleared that day, pop it into a PC, sort their cancelled checks in whichever way they choose and manage their funds accordingly. Banks that offer check imaging benefit not only by handling less paper and paying less postage and transportation costs, but also by reducing their backroom operations in terms of personnel and storage.