Wells Fargo has announced that it is joining a growing number of large banks adopting electronic imaging technology for front- and back-end systems.
This is to prepare for the passage of legislation that will give electronic cheque images the same validity as paper cheques for clearance and settlement.
Banks have moved quickly to adopt online cheque imaging for customers but have been slow to add the technology on their back-end systems to exchange those images with other banks and clearing corporations for settlement purposes. The law currently requires banks to exchange paper copies of cheques.
Using paper cheques requires expensive and time-consuming manual processes that slow fraud detection and make delivery of settlement information unreliable.
During the 11 September terrorist attacks, for instance, all airline traffic was grounded for days, halting the delivery of paper cheques for processing between banks.
That's about to change.
Earlier this month, the Check Clearing for the 21st Century Act, also known as Check 21, was reintroduced in Congress and is expected to pass quickly.
It allows banks to voluntarily exchange electronic images over networks instead of using paper cheques, a process that completely automates the clearing process.
Mitch Christensen, executive vice-president of payment strategies at Wells Fargo, said the company is beginning a six-month roll-out of IBM hardware and software from Dallas-based Carreker in roughly 16 regional cheque processing facilities around the country.
Wells Fargo purchased a suite of Carreker image processing and archiving applications. These will allow the bank to capture and truncate cheques at distributed locations, control and monitor access to image repositories and deliver those electronic images.
The software will reside on IBM 3890 XP reader/sorters and Wells Fargo databases.
Christensen was unable to say how much the roll-out will cost .
According to Avivah Litan, an analyst at Gartner, electronic cheque imaging is driving IT purchases in financial services for software, storage and web servers. While IT spending is down in every other business sector, the financial services industry is expected to boost IT spending by 4% this year.
Banks now use magnetic ink character recognition to scan serial numbers at the bottom of cheques for settlement purposes, but they must still perform manual signature recognition and remittance.
Once Check 21 is passed, there will be an 18-month implementation period during which banks can roll out imaging technology and set up electronic exchanges with partner institutions.