Study Shows Banks Not Prepared for Check 21
Despite the benefits the Check Clearing for the 21st Century Act (Check 21) promise for the financial institution industry, banks are not yet prepared for the operational and business challenges that act's provisions will bring, a study by Unisys Corporation concluded. Check 21 allows banks and other parties that accept check payments to truncate checks at the point of acceptance. The act gives substitute checks, such as a digital image of the check, the same legal standing as a paper check, so that payment can be converted to an electronic transaction. Check 21 takes effect next fall.
The law will drive banks to view checks not in a vacuum, but as part of an enterprise payments strategy with the potential to deliver both operations savings and better strategic value to customers, Unisys said. Many financial institutions are now looking at ways to capture check images in retail locations, to image-enable sorters or to outsource payments, Unisys said.
However, despite the overall possibilities for saving money and speeding the system, most current industry initiatives focus on either selected customer touch points, such as what will happen in the retail bank branch, or only on certain parts of the check truncation process. Without effective coordination both among and within financial institutions as well as with other important players in the payments process, confusion and slow complete digital truncation is likely to occur, Unisys said. Senior executives at banks speculate that a 50- to 60-percent overlap of transaction services, internal processes, and future infrastructure requirements now exists, Unisys said.
Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 11, 1/04
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