Consumers Ready to Adopt Check Imaging Technology, Credit Unions Positioned To Provide It
DES MOINES, Iowa -- Credit unions are converting from paper to imaged check processing systems at such a quick rate, they're in a unique position to leverage that technology to gain market share, processors say.
Judy Philben, director of item processing for The Members Group, said imaged items now account for nearly 80% of the CUSO's share draft processing, and those who have made the switch should market the technology's consumer benefits to their advantage.
"There's a few big banks out there that are offering merchant capture, but because credit unions are generally ahead of the curve on check imaging, I think it could be an effective marketing tool for credit unions who want that merchant business," Philben said.
The Members Group, which is jointly owned by the Iowa League and Iowa Corporate Central, will begin actively marketing merchant capture services to its member credit unions in a couple of weeks, she said.
Imaged checks account for about 77% of all processed share draft items at The Members Group, or about 2.7 million of 3.5 million monthly items.
Philben said the organization has a modest goal of three million monthly imaged items by next year, but said the actual amount may be higher if new image exchange opportunities work out, and business grows as expected.
Members United Corporate Credit Union hasn't converted as many of its members to check imaging as the Members Group has, but considering the Warrenville, Ill.-based corporate processes 10 times the volume as its Midwestern neighbor, conversion is a much bigger job.
Vice President of Item Processing Terry Faurote said his clients are about 25% image-enabled, and he expects that number to climb as high as 35% by the end of the year.
However, that isn't stopping the corporate from gearing up for an aggressive merchant capture campaign of its own.
"Merchant capture is starting to become a big commodity for our credit unions," Faurote said, "because I think credit unions, as a whole, are really focusing on member business accounts, and they feel this is a good inroad to get business deposits into the credit union. Most of the corporates really led the way for image exchange and processing, and credit unions are looking to keep that competitive edge against community and larger banks."
Merchant deposit capture technology allows business owners to scan checks received for payment at their place of business, and electronically transmit payment and MICR information directly to their financial institution. Business owners benefit from check imaging the same way financial institutions do, by eliminating costly and time consuming trips to the branch to deposit checks, and by gaining quicker access to deposited funds.
Boston-based financial research firm Financial Insights predicted in their July 2007 Payments Newsletter that more than half of all banks will be offering remote deposit capture services by the end of 2008. By 2011, the firm projects that all banks will offer the service, and 25 percent of all businesses will be using it.
Capturing deposited check images at ATMs is another convenience service that can be marketed to members, and Faurote said now that technology provided by Diebold and NCR are up to snuff, Members United will begin marketing the service in early 2008.
Columbia, S.C.-based Palmetto Cooperative Services will also be marketing its ability to support ATM deposit imaging technology in a couple of months.
South Carolina League Executive Vice President Ed Culpepper, who oversees the CUSO, said his group is currently speaking with a credit union interested in offering the service. Both ATM and merchant capture services are "in development" at Palmetto, Culpepper said, but should pick up steam early next year.
Palmetto currently processes about two million share draft items per month, about 60% images and 40% paper. By year-end, images should account for 75% of share draft items.
Culpepper is sticking by the claims he made earlier this year, when he predicted the demise of the check courier industry next year. The VP said he thinks all of Palmetto's check processing clients could convert to check imaging platforms by the end of 2008.
"I wouldn't be surprised," Culpepper said. "I would certainly like to see all our processing to be image based by the end of next year. That, or something close to it, is achievable."
Considering Palmetto processed only 116,000 images just last October, converting the remaining 25% during the next 15 months doesn't seem out of reach. And the CUSO won't have any new paper processing clients, because that product is only available to existing clients, Culpepper said.
All three processors utilize Endpoint Exchange, though Members United originally signed on with SVPCO, because it had relationships with banks that exchange the most paper with its clients, Faurote said. SVPCO has since linked with Endpoint Exchange.
All three also work directly with the Federal Reserve Bank, though Philben said her group is relatively new to the Fed.
Though she said she's noticed drastic increases in Endpoint's reach, Philben said she's still moving forward with direct exchange relationships with large, but local, Iowa banks.
"With our local institutions, there's no reason we can't work together to eliminate the middleman," Philben said. "We haven't successfully linked up with anyone yet, but we're on the list, and we know they have it planned. Many of them are just working out all the specific controls and securities."
Culpepper said he is currently negotiating a direct exchange deal with a "major bank."