“If you build it, they will come,” to paraphrase the famous line from the movie Field of Dreams. But when it came to developing a Check 21 solution, it was a little more complicated than building a baseball diamond in the middle of a cornfield. There were questions about processes, technology, regulations, as well as consumer education and acceptance. Many financial institutions simply took a “wait-and-see” approach to finding a solution.

But now, 17 months after the Check Clearing for the 21st Century Act became effective, it's time to move beyond that “wait-and-see” attitude and reap the benefits as they relate to Check 21. Credit unions that continue with “wait-and-see” may soon find themselves “waiting” for significant cost savings from the elimination of courier fees and microfilming costs and “seeing” higher traditional clearing costs as the per unit expense of handling paper items skyrockets.

To illustrate these points, let's take a look at the numbers. According to a study conducted by the Federal Reserve and released in 2005, the number of checks being cleared has declined from about 50 billion in 1995, to around 36 billion in 2003, with an annual rate of decline of about 4.3% annually since 2000. Conversely, ACH and debit card transactions are experiencing tremendous growth. In fact, in 2004, for the first time in history, the number of electronic payments outnumbered check payments.

So what does this mean for your credit union? First, it means that although the number of checks is declining, there will still be checks in the payment mix for many years to come. Thirty-six billion checks is still a lot of checks. Second, it means that declining volume plus high-fixed costs will equate to exploding per unit costs. It also means that credit unions that find a way to more efficiently process and clear these items will have an edge, both financially and in terms of improved member service, over those financial institutions that continue to “wait and see.” Even so, for a time, wait-and-see was the right approach. It allowed for some of the larger financial institutions to become less dependent on their legacy systems and begin migrating over to new image-enabled technologies. This was important because we needed the larger banks to play in the sandbox with us, as most credit unions' deposited items are drawn on these large banks. Waiting also allowed vendors time to develop better technologies to help us more efficiently and accurately image, clear and settle items at much lower costs. However, getting the financial institutions and vendors on board was only part of the equation. Without networks capable of allowing financial institutions to exchange images, full deposit automation and image exchange had no hope of flourishing. Check 21 was the kick in the pants the industry needed to jump-start this revolution. Clearinghouses needed to be built and standards needed to be established. And the industry responded. We now have those clearinghouses in place, and their numbers are already impressive.

For example, SVPCo, one of the leading clearinghouses, had a 38.7% increase in the average number of daily items they exchanged in one month – from March to April 2006. In April 2006, SVPCo exchanged 35.2 million items And, Endpoint Exchange, another clearinghouse, was already delivering eight million images to paying financial institutions at the end of the third quarter of 2005. Add to that millions more images that are being exchanged through ViewPointe – a clearinghouse owned by some of the nation's largest banks – or through the Federal Reserve's clearing solution.

But where does that leave credit unions? As already mentioned, we have an increasing need to clear checks more efficiently, and we now have reliable and secure mechanisms to clear and settle electronic images. But it needs to be affordable. And here's the great news, now it is.

With the addition of so many new players into the world of image exchange, including financial institutions and clearinghouses, competition is already bringing down the cost to clear and settle items. Add to that the sheer increase in the volume of images being exchanged, and per item costs are beginning to look much more attractive. Additionally, some processors have developed a least-cost-routing model that will route an image to the least expensive endpoint for clearing. For example, an image might be sent to one of the major clearinghouses for clearing, to the Federal Reserve, or directly presented to the drawee bank for even more savings. As an example, in a month's time, using a least-cost-routing model, Corporate One saw the amount to clear and settle an item go down 25% in one month, only to have the cost drop another 30% the next. And other processors are experiencing the same thing.

So, if your credit union has been doing the “wait and see,” it's time to get moving. Call your corporate or your check processor and find out what it takes to get you up and running on electronic image collection and exchange. But here's a word of advice – when you consider processing your checks through image exchange, consider other factors than just the per item cost. For example, consider your cost of microfilming the item and maintaining a library of images (both in terms of labor, equipment and developing costs). Also, you will no longer have to pay a courier to transport your items. Plus, you'll have some important member service benefits: including the ability to potentially detect fraudulent items; the ability to retrieve images of scanned items, usually within the hour; and, potentially even providing your members with faster access to their funds.

Check 21 is a great opportunity for all financial institutions as well as for their members/customers. And now that the obstacles for entry into this new world have all but vanished – your wait is over. Waiting will only cost you more in the end, both in dollars and member satisfaction. It's time to enter the Check 21 field of dreams.