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Banking Special Issue: A Forward Look

Table of Contents


The Future of Bank Imaging

The green wall

Relationship Banking

Proof of Deposit

POD Case Study

Designing Forms for a Banking Environment

File Folders

Thrashing Folders

Staging Folders

Using COLD (a case study)

Check Processing: The need for Speed

Printing Your Own Checks

Check Processing 101

Images from the Fed

First National Bank & the Fed (case study)

Glossary of Bank Image Technology


by Joe Devlin

In the last two years, the banking industry has experienced an eightfold increase in the number of institutions using imaging for check processing operations. More than one-third of all financial institutions will be using imaging technology by the year 2000.

The window of opportunity for bank imaging is still wide open, but it won't stay that way forever. Experts predict that the market for check imaging will continue to grow over the next decade, eventually being replaced by purely electronic payments and storage sometime after the arrival of the millennium. In the meantime, VARs can expect a wild ride.

How promising are the next couple of years going to be? A recent study by the Durham, NC based Mentis Corporation, a research firm specializing in the financial services industry, provides some perspective. "In the last two years, the banking industry has experienced an eight-fold increase in the number of institutions using imaging for check processing operations," says Mentis president James B. Moore, Ph.D. He predicts that more than one third of all financial institutions will be using imaging technology by the year 2000.

The growth in imaging is coming from several directions at once. Early adopters of bank imaging tended to use the technology to solve a single problem. For example, a bank might have installed imaging to streamline its loan process, create image statements, or automatically capture the amounts written on checks through the proof of deposit stage.

Most banks taking this approach discovered that using imaging to solve one isolated problem rarely proved cost-justifiable. Thus, banks began looking for additional uses of the technology to help amortize the high costs across multiple solutions Banks that use IBM technology today have an average of two image applications," says Doug Halvorsen, worldwide marketing manager for Charlotte, NC-based IBM Check Imaging. Halvorsen explains that it is difficult to cost justify imaging technology for one application.

In the past, imaging technology was justified via the displacement of employees. Now, banks are spreading the costs across a number of applications, such as image statements, proof of deposit, archiving and remittance.

Banks are also justifying the costs of imaging applications externally with increased fee income, customer satisfaction, and market share. "Banks have an opportunity to create image-enabled products to market to customers to win their business," adds Halvorsen.

To illustrate where imaging technology is going, it is instructive to look back to the mid-1980s, according to Dr. Moore of Mentis. At that time, large banks, in conjunction with vendors, initiated pilot programs to apply imaging technology to POD systems to increase throughput and decrease costs. Solutions involved mounting image cameras on high-speed reader sorters. The pilots enjoyed limited success and, more importantly, generated ideas for new technology solutions. "When you lay new technology over an existing business process, you have to re engineer the process to adapt to the new technology," says Dr. Moore. "When the large banks reengineered their systems to adapt to the new imaging technology, they realized cost savings of 60 to 70 percent with the underlying technology alone."

Large banks which invested considerable sums of money in POD imaging applications began considering other uses for the technology. They moved to statement printing, which provided customers with smaller statements that included little images of each check rather than the check itself.

Mid-sized banks began adopting statement imaging between 1993 and 1994. Vendors began offering lower-cost statement imaging solutions, igniting interest in this second tier of banks, which had not previously been candidates for the high priced solutions.

We entered a third phase of check imaging just last year," says Dr. Moore. "The market began to grow strongly as mid-sized banks implemented check imaging and the solutions designed for large banks became functional."

Imaging solutions for statement printing were less costly to implement than those for POD because they also included a marketing justification.

Mentis projects strong growth of imaging applications at least through 1997 and predicts that rates of increase among large banks will decline as the market approaches stabilization by the year 2000.

At the beginning of the next century, the rate of increase of paper check volumes will begin to decline as electronic alternatives make inroads into check processing operations. Following rapid acceleration in the use of image applications, adoption of the technology will begin to slow and the amount being spent for imaging applications will stabilize. Small banks will not reach saturation levels as quickly as large banks. The low cost of small bank solutions will encourage further adoption of imaging technology, maintaining rates of increase for a longer period of time.

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