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Transition to Check 21

Ron Schultz, VECTORsgi

Question: What exactly will Check 21 allow us to do?
Answer: When it goes into effect on October 28, 2004, the act will allow an institution to make a unilateral decision to truncate all paper checks. No agreements with other parties to perform this truncation will be required. The Act enables this by authorizing the creation of a substitute check from an electronic record (image) of the check for those banks and customers who have not agreed to accept an electronic record of a check.

Question: Why should my bank transition to image exchange?
Answer: Image exchange will reduce or eliminate sorting, transportation and delayed posting costs. You'll avoid the delays of ground and air transportation methods, lessen the chance of checks being lost, and eliminate backlogs created by paper checks which cannot be physically transported due to weather or unforeseen events. Image exchange will also reduce fraud, by making check images available in electronic form for fraud analysis in minutes or hours instead of days.

Question: How do we get ready?
Answer: Check 21 readiness is best achieved in a planned and managed set of phases:
  1. Develop an image strategy. This would include check image capture, check image quality assurance, image archiving, and the image enabling of your back office. Attend conferences, avail yourself of web resources such as www.eccho.com, ask for lessons learned, and network with those who have experienced the trials and successes of image initiatives. Next, determine how you want to exchange images with other banks, the initiatives you must undertake to achieve that objective, and the time frame you want to achieve it in.

  2. Evaluate your readiness for image exchange. Identify and consult with candidate exchange partners and vendors of image exchange software. This will help you understand the available options, and decide which one is best-suited to your bank's specific requirements.

  3. Finally, execute and monitor the necessary steps to implement your bank's chosen image and image exchange strategy.
Question: What are my options as far as a mechanism for exchanging images with other banks?
Answer: Two approaches to image exchange have emerged as the most viable alternatives. You may elect to create bi-lateral agreements that allow for direct-send exchange between your bank and another. Or you may find that image exchange with many banks is best accomplished via SVPCo's Distributed Traffic Agent (DTA). Each approach comes with its own file formats, exchange controls, and settlement models. In either case, your bank will need a software solution which facilitates and automates the image exchange process. Many banks will elect to use the VECTOR Image Exchange Solution because it represents an immediate, easy and cost-effective means of exchanging images.

Question: What should I look for in an image exchange vendor/solution?
Answer: Image exchange is much more than simple file transfers. Ask your vendors for specifics on their approach to image quality assurance, performance, security, monitoring, and reliability. The image exchange landscape is evolving. Ask your vendors how they respond to changes and how will they keep your options open to new exchange models or improvements in existing models. Ensure that your vendor has a "big picture" perspective of check image exchange. Finally, make sure their attention is not limited to Day One processes only.

Ron Schultz is Manager for Special Projects for VECTORsgi, a leading provider of financial transaction processing, image exchange, currency control, reconciliation and e-commerce solutions to financial institutions and corporations around the world. The world's largest banks depend on VECTORsgi products and services to help reach objectives such as operational streamlining and the implementation of check image technology. VECTORsgi's software products, VECTOR Solutions, have been licensed over 2300 times. 21Ready, from VECTORsgi Consulting Services, provides management consulting and business practice improvement that helps financial institutions become ready for image exchange – and become more profitable. For more information, visit www.VECTORsgi.com .

First published on BankersOnline.com 12/1/03
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