How can credit unions enjoy the greatest benefits from Check 21?That's the question facing our industry now that Oct. 28 has comeand gone. Last summer, hardware manufacturers, image exchangenetworks and service bureaus flooded the media with visions of thefuture. Seminars explained substitute checks and expeditedre-crediting, then shifted focus to image processing, branchcapture and fraud detection. Now reality sets in. The gap betweeninitial euphoria and emerging reality hinges on one simple fact –many financial institutions don't use check images today! Thatmeans all of us will process a lot of paper with an increasingvolume of images. Timing the switch to mostly image depends on aquestion posed at the last BAI Transpay conference: “When will halfof all transit items be exchanged?” Transpay's exchange expertsanswered the above question: “mid-2006.” While we wait, here arethree important facts: Image exchange networks will not immediatelydominate the check processing world. The switch to image will befitful while large banks sever their ties to paper and force otherinstitutions to receive images. Substitute checks will grow involume as some institutions migrate to images and others cling topaper. When more institutions use image than paper and the cost ofimage falls below paper, substitute check volume will fall. Branchimage capture devices will replace microfilm at an acceleratingrate, which will drive the increase in transit image volume. Sowhere are the golden nuggets in Check 21? At this point, there arethree contenders for appreciable benefits: check image aggregators,branch capture, and workflow redesign. Here they are in greaterdetail: Image Aggregators – The most accessible Check 21 benefitswill come from aggregators of check images – most likely youroutsourced check image processor. Because they move a greatervolume of items through the payment system, they can find betterpricing than most credit unions. Because image processes are fasterthan paper, your institution stands to reduce fraud and improvefunds availability. At this point, the quality aggregators shouldhave well-developed Check 21 plans to leverage the value of imageprocessing. The advantage to the outsourced image approach is thatit costs very little beyond charges for setting up image settlementand ongoing image cash letters. Basically, as soon as your imageoutsourcer is ready for image exchange, so are you. One caution –if your current item processing mechanisms need upgrades for imageexchange, do a thorough ROI analysis. The value of these machinesis declining significantly. To deliver real savings, your processorshould have sufficient image volume and robust relationships withseveral image exchanges. This will enable the processor to routethe institution's images to the lowest cost exchange and pass alongthe cost savings to your institution. In addition, the processorshould support all the components of image exchange, particularlythe ability to: Capture images of all transit and in-clearing itemswith a searchable archive of all imaged items immediately followingcapture. Export image item information to an image cash letter withtotals of all items captured. This will help teller, check andbranch balancing while expediting the check clearing process.Provide proof services for imaged items. Process an incoming imagecash letter with settlement of image and non-image work. Returnimage items. Produce image, traditional paper, and e-statementswith substitute checks. Keep in touch with your check processingvendor to see what's coming and when. Also, keep an eye on yourvendor's image volume. The more images they process, the greaterthe savings to your institution. Branch Capture – Branch capturedevices can improve an institution's operational efficiency andhelp reduce fraud. But more than image aggregation, branch capturerepresents an investment in time, money and expertise to properlyhandle transit images. Capturing images at the first point ofpresentment has potential advantages in reduced encoding andtransportation costs as well as increased funds availability.However, branch capture raises important workflow issues,particularly how tellers will capture items during a busy day;balance the incoming check images, and review high-dollar andsuspect items. To answer the busy teller issue, equipment vendorssuggest a back-counter solution where the tellers scan items intheir free time. Long term, however, the promise of presentmentclearing won't materialize if the items wait to be scanned. Morelikely, the scanning task will shift to your tellers. Softwarevendors have answers to balancing scanned check images, checkinghigh-dollar items, and examining fraud suspects. But these add-onsare costly and need to integrate with current processes,particularly the teller and item processing applications. Whenconsidering a branch capture solution, think about the following:Does the proposed solution replace all current processes? Does theproposed solution integrate with your current teller system so thatteller transaction efficiency increases, teller balancingaccelerates and transaction accuracy increases? Does the proposedsolution integrate with your current image processing system so youcan research items as soon as they are scanned? Does each branchhave the communications bandwidth to accommodate frequent checkimage transmissions? When can your institution reasonably expect areturn on its investment? Workflow Redesign -Workflow changes willdeliver the greatest Check 21 related efficiencies. But since thisis a transition period from paper to image, the workflow changeswill come in stages, culminating in the full benefits ofpresentment clearing. While we're all waiting, your institutionshould perceive Check 21 as an opportunity to integrate branchoperations, IT, compliance, risk management, and item processing.Consider forming an “Image Team” from staff in all areas. With athorough understanding of the current check process, the Image Teamcan quickly evaluate proposed changes in process and make informedrecommendations to the institution as a whole. In the next fewyears, your institution could reduce staff assigned exclusively tocheck processing due to greater reliance on front end systems tocapture the items. Capture quality and accuracy of the automatedencoding will be critical to your cost savings. Be relentless! Yourgoal should be integration of captured images with your currentworkflow, particularly teller, archive, clearing, posting andstatement rendering. Expect that future ATMs will be equipped withscanning devices as well, making it possible for your clients tofeed checks into the machine, which will scan them and transmit theMICR line plus image amounts to your image processor. Finally,consider interim solutions, such as back-counter capture, since itrequires no changes to teller systems and gives your institutionand the industry valuable time to adjust to the image world beforetaking the final steps toward a checkless society. And remember thename of the Check 21 game is economics. If it doesn't pay, don'tplay.