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HOLMDEL, N.J. – Last week saw a flurry of announcements from corporate credit unions and how they are making significant progress in taking advantage of Check 21 and moving the industry closer to full blown image exchange. EasCorp recently began to manage in-clearing work from 20 of its members using image exchange with the Fed in District 1. EasCorp is only one of approximately 125 institutions active in the Fed’s Fed Receipt program. EasCorp said it believes it is the first corporate in the nation on this program. Credit Union Times could not find any other corporates live on Fed Receipt, though Southwest Corporate expects to go live some time in February. “We are doing this in a pure image environment, there’s no paper coming to EasCorp at all,” said Alan Bernstein, senior vice president with EasCorp. “We process those images through our back-end system in the same way we handle paper-based items, and forward the information on to the credit union’s data processing system for posting. We are now handing the returns in a pure check 21 electronic fashion, the paper is somewhere else in the country,” said Chris Smith, senior vice president, computer information systems for EasCorp. EasCorp is unique in that it wrote all of its image exchange software in-house. Smith said it’s interesting that as big as banks are it is the credit union industry that is leading the way on image exchange. Unfortunately, credit unions have to wait for the big banks to catch up for image exchange to really take off. Fred Herr, senior vice president of payments office for the Fed in Atlanta, said he’s not surprised credit unions are leading the way on image exchange. “If you look back on the history of credit unions with image statements and image technology, they were pretty aggressive in adoptions. Also, credit unions tend to use processors, so when processors convert over they convert a lot of credit unions. On the banking side, a lot of banks process for themselves.” The problem for the Fed and others is until both financial institutions involved in a check exchange are electronic, substitute checks have to be printed. Herr expects substitute checks to be printed through 2007. Southwest Corporate is seeing electronic image exchange volume steadily increase. “We’ve been pretty aggressive I think. Last month, we did about 3.3 million images exchanged with other financial institutions, that’s approximately 12% of all the items we process,” said Jody Beck, senior vice president of operations for Southwest. Southwest has several exchange relationships. It was an early participant in exchange network Endpoint Exchange and was one of the first institutions certified for the Fed Forward program. But beck said a real win for the corporate has been direct exchange relationships, where it bypasses the Fed, Endpoint Exchange and others. “What really drove our volume was a direct relationship with Cross Bank out of San Antonio. This is just direct, not going through any networks,” she said. Southwest currently has 39 CUs, with a total of 122 branches, using its image capture solutions. Corporate One FCU is also using the direct relationship to boost its exchange volume. It has formed a relationship with KeyBank for image exchange. Corporate One has 100 branch capture sites up and running and approximately 10% of the items sent from those branches are drawn against KeyBank. Corporate One is exchanging images with KeyBank, the Federal Reserve Bank of Cleveland and EndPoint Exchange. Robert Coyan, senior vice president of marketing and operations for Corporate One, said forming direct relationships with local institutions is key. “I think if you take a look at anybody’s mix, you’re going to find that roughly 90% of the payments they’re settling for their members each and every day are a result of the local financials. They may be national players by name, but they have a local flavor,” said Coyan. Coyan is excited when he sees other corporates and other check processors making strides with image exchange. “It’s a fantastic step for the industry as a whole and provides momentum for full image exchange,” he said, and when that happens everyone will benefit. From reduced fraud, faster clearing, elimination of paper and reduced costs, image exchange is good for the financial sector, he said. Corporate One has approximately 125 CU branches using its image capture product. Most credit unions are capturing images in the back office. There has been talk of having tellers capture items right at the teller station, and that’s something WesCorp is looking into. Rick Stanton, director of product management for WesCorp, said teller capture is a different approach with pluses and minuses. It makes a lot of sense for branches that have a very high volume of items. “If you have a very busy branch with tellers doing 1,000 or more items a day, there’s efficiencies you can get at the teller,” said Stanton. The down side is the CU would have to buy a scanner and a license for every teller station – which can be costly and obviously wouldn’t make sense for a low volume branch, said Stanton. WesCorp has its image capture solution in about 30 CUs, representing approximately 60 branch end points. Stanton also reported that WesCorp was selected by Endpoint to be part of a pilot for exchanging items with Viewpoint. This is a big deal because Viewpoint is owned by the largest banks, including Bank of America and JP Morgan Chase. One interesting side note to image exchange is credit unions may lose some control of image quality. If the paper trail stops at say Bank of America, the credit union will ultimately get back the image that bank made. Thus, the image a member may pull down from the CU’s home banking system of a cleared check is not completely in the CU’s control. Stanton said that image quality is an issue, but it will ultimately behoove everyone to ensure the images are high quality. Constitution Corporate Federal Credit Union reported recently that more than one-third of its check collection branches have either started transmitting or have signed on for ImageXchange, the corporate’s branch item capture solution. Constitution Corporate was an early tester of the Fed’s Fed Return product to return items electronically. Currently Constitution returns from 16,000 to 18,000 checks monthly, so it will save courier costs, the corporate believes. Constitution is also working through some scanner issues. Its capture program originally relied on the Canon CR 180 printer, which can scan 180 items, front and back, per minute. It is now also offering CUs the CR 55, which does 55 a minute. The CR 55 has some additional functions that forced some software changes. “Next week we begin installing the 55s,” said Dan Poulin, director of business development & marketing for the corporate. Most interviewed for this story say they believe that it will benefit the credit union industry to form some type of consortium down the line for imaging so the industry can benefit from economies of scale. [email protected] (Editor’s Note: This story focused on what corporates are doing with image exchange as part of the Corporate Credit Union Special Report. The March 8 issue, which features a Check 21/Image Exchange Special Report, will take a broader look, including league service corporations and other processors. Please contact [email protected] for more information.)

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