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ARLINGTON, Va. – Credit union ATM deployers will move substantially closer to the dream of moving imaged checks from ATM to final presentation in 2006, but will need to keep an eye on possible changes to debit interchange structure, according to executives with leading ATM and EFT networks. “2006 will be the year when we will see much of the software and hardware necessary to make imaged check processing a reality put into place,” said Jim Hanisch, senior vice president of CO-OP Network, one of the two remaining credit union-owned ATM networks remaining in the country. Despite the impression that the check imaging allowed by Check 21 has been gradually taking hold in various parts of the country, in reality most of the checks that are imaged still need to be picked up and processed in the same way they always have been, Hanisch explained. “Right now, there are credit unions around the country putting ATMs in place that scan members’ checks and print their images on the members’ receipts,” Hanisch said. “Members like that and that’s a good thing. Now the industry has to build and test the infrastructure that will move and process those images,” he added. The ATM industry now is roughly analogous to a nation with villages but not cities and no superhighways. The villages are individual credit unions which have begun to deploy check imaging ATMs and the cities are the processing hubs that are needed to process those. The superhighways are the networks necessary to move the imaged check from the ATM to the processing hub to the check writers’ financial institution. “Right now,” Hanisch said, “we don’t have the cities or the superhighways in place to handle imaged checks. But we will.” Hanisch explained that complexity of the procedures needed for transferring and processing imaged checks, along with the need for accuracy and security, had slowed the development process down and ATM manufacturers worked more quickly to first get the hardware for imaging checks into place before turning to the software and hardware to support transmitting the imaged checks. When it comes to other technology changes in 2006, much of the time will be taken up with tightening up the technology already in place. Jim Park, CEO of Credit Union 24, the credit union-owned ATM and EFT Network headquartered in Florida, said that 2006 would be a year when the network moved more of its switch management to Fifth Third Processing, an arm of Fifth Third bank which the network said it had begun working with in November 2005 in order to increase efficiency and lower costs to the member credit unions. He acknowledged that the changes involved in check imaging are coming but said added that American ATM users may not yet be fully on board with them yet. “There is an interesting reverse trend phenomenon between here and Europe,” Park observed. “In Europe they have had ATMs which have been able to do all sorts of things for years and the people love them. Here they haven’t really caught on. But we had debit cards first and only now those are catching on in Europe.” Ron Silvia, a director with PSCU Financial Services who works primarily with debit and prepaid cards, echoed Hanisch’s observation about increased security precautions for debit transactions in which cardholders use their personal identification numbers for validation. “Essentially every precaution that is in place for credit card and signature debit cards are going to be in place for ATM and PIN debit transactions,” Silvia said. “These things have been in place for years on the cards but everyone said `oh, we don’t have to use them because we have the PIN number.’ Now, we have to start using them.” Silvia credited CUNA Mutual Group for being a leader in the anti-fraud effort and said that the leading CU insurer would be the driving force behind making the card security changes, including mandating that all debit transactions, even those with PINs, use the all the security data available on the back of the card. But the biggest possible debit card news in the coming year may be the most difficult to see, according to Hanisch. Sometime in 2006 it may be possible that there may be a settlement of the over 40 lawsuits retailers have lodged against Visa and MasterCard and the results of that settlement might be a significant restructuring or even elimination of the interchange system, Hanisch said. “Both Visa and MasterCard are under tremendous pressure to reform their interchange practices,” Hanisch observed. “No one can predict how it might turn out because the matter is before the courts, but credit unions have to be aware that changes might be coming.” Hanisch also predicted that credit unions’ continuing effort to tailor their ATM and debit networking to their members needs would continue. Credit unions need to be able to let their members have the ATM and EFT networking that they believe they need, Hanisch observed. It will likely become even more routine to participate in several different ATM and EFT networks which can keep their members’ money accessible. [email protected]

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