Checking Into Remote Capture: What Credit Unions Ought to Consider
When the Check Clearing for the 21st Century Act took effect some 16 months ago, it paved the way for what many describe as the greatest advance in check-processing technology since the MICR line - the ability to perform remote capture and transmit electronic image cash letters (ICLs). For most credit unions, there are ample reasons for embracing this technology, including faster availability of funds and later delivery deadlines - both of which positively impact earnings as short-term interest rates continue to rise. And reduced transportation costs attributable to electronic delivery are no less compelling. Of course, remote capture refers to a variety of mechanisms for capturing, transmitting and collecting ICLs. These include branch capture, teller capture, and capture at a variety of peripheral devices such as ATMs, deposit-taking kiosks or scanners located at member business locations, so the list of reasons goes on and on. Developing a remote-capture strategy carries with it a series of considerations and challenges. So before finalizing the strategy used at your credit union, ask the following questions: * Should capture be centralized or decentralized? Teller capture is a good example of a decentralized process, providing for efficiently handling items and enabling check images to be integrated with transaction information right at the teller line. However, teller capture requires scanners at each teller station - a costly proposition at best. Although equipment and other costs may decrease in the future, for now, teller capture may be more costly than it's worth. Branch capture offers a viable alternative. This option limits the cost of hardware, technical support, and employee training to the bare minimum of scanning devices needed per branch. And the operational considerations are reduced to how often checks will be scanned and by whom. * What equipment and software vendor support is necessary? It's important to choose equipment and software vendors that are knowledgeable about Check 21, as well as about credit union rules and regulations. Equally as important is establishing the vendor's knowledge of and competency in item processing, financial settlement and other matters related to check collection. Vendors have entered this market space from many different places, including office equipment, data processing and correspondent banking businesses, so it's vital to establish their view of the "big picture." It's clear that remote-capture technology is evolving rapidly, so when you evaluate vendors, be sure that their service fees reflect this changing environment. For example, ask if software license fees cover future upgrades and enhancements. This will help ensure that your credit union is positioned to make the most of Check 21 as the technology evolves. * What program features are important? Creating a matrix of various providers' features and benefits can help determine the best solution for your credit union. Key features to ask for include courtesy and legal amount recognition (CAR/LAR) - tools that can recognize the amount written on the checks automatically. These tools ought to successfully identify amounts on the majority of your items (up to 80 percent) and save your staff a great deal of processing time. Ask if the vendor's solution includes CAR/LAR software. If it does, determine if it's a standard feature, or is optional and provided at an additional cost. You'll also want to know if the vendor's solution integrates image-quality testing. Image-quality testing can prevent you from submitting items that don't meet minimum quality standards, which would inevitably result in adjustments, additional research, inconvenience and processing delays. * What should you expect from your correspondent institution? Naturally, ICLs have to be collected through a settlement process, and most credit unions rely on a corporate credit union, the Federal Reserve Bank, or a correspondent bank for this purpose. Be certain that your vendor's software solution enables you to direct the file wherever you choose and that the connection is tested and proven. Select a correspondent institution that is well on its way toward electronic file deliveries; i.e., participates in the Federal Reserve Bank's FedForward Image Cash Letter program and/or other image exchange networks. This will ensure the best availability of funds, lower transaction costs and other benefits of Check 21 for your credit union. If your correspondent institution also provides the equipment and software vendor support noted above, including competitive features at competitive prices, you will have the convenience and other advantages of one-stop shopping. * What other considerations are there? Although remote capture will eliminate the bulk of paper items, some items will still need to be presented physically, such as savings bonds, checks drawn on foreign banks, and items for which a quality image cannot be obtained. It is important to consider how to handle these paper check collection items. Ask, for example, if your vendor and/or correspondent will assist in the collection of these items. Moreover, retention of the physical items is one of the big legal unknowns. Check 21 did not mandate any specific retention requirements, so credit unions must decide for themselves what is an appropriate retention period. From all indications, credit unions are making a wide variety of choices ranging from 90 days to a full year. Regardless of your decision, physical storage and destruction must be considered as part of your implementation plans. Finally, there are future considerations, such as capturing items at peripheral devices. Many ATMs and electronic kiosk devices already have the ability to produce ICLs, making it unnecessary to service them on a daily basis. As well, credit unions are already considering how they can assist their member business accounts with remote-capture solutions at the business location. Take the time now to discuss these options with your potential vendors. Be sure that they are committed to serving not only your needs today, but your future needs, too.