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Banking Special Issue: Glossary of Bank Image Technology


Table of Contents

Introduction

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

 CAR Engine Courtesy Amount Reader (CAR) - Intelligent character recognition (ICR) software that locates and then reads the courtesy amount of the check - the number printed in numbers on the upper right side of the check (for example, $34.95).

  Cash Letter - Outgoing cash letters are bundles of checks organized by bank and the wrappers that summarize the content of each bundle. These bundles are sent out to the local Federal Reserve branch each night to be forwarded along to the banks on which the checks were drawn. Incoming cash letters are the checks that arrive at a local bank after being forwarded from the Federal Reserve each night.

 Cash Management - The handling of information, usually check amounts and images. Traditionally, this was done by providing the customer with reports and statements to help them understand the flow of their money. Until recently, the expense of providing cash management services was considered just another cost of doing business for banks. Recently, banks have been looking for ways to provide better cash management services as a way to keep old customers, attract new ones or to generate new revenue. Thus, the movement towards image statements and CD based statements.

 Cash Treasury Management Functions - Collection management and disbursement of funds.

 Check Truncation - Process of destroying checks shortly after they have been imaged. Shredding the check after capture saves all the expense incurred by moving and storing all those annoying pieces of paper.

 Consolidator -- a model of EBPP in which bills are collected from many billers, aggregated into a single service, and presented for viewing and payment through a single web site.

Coupon -- see stub

 Courtesy Amount - The numeric amount field on the upper right side of a check in which the customer usually prints the amount as a dollar and cents figure, for example, "$14.22." Also called the convenience amount.

 Direct Model EBPP -- A form of EBPP in which a a biller delivers the bill to customers via its own Web site, or via a third-party's site. Using this method keeps control of the biling information in the hands of the biller, but it forces end users to log into a different web site for each bill they wish to view and pay on line.

 EBPP ( Electronic Bill Presentment and Payment). Using the internet or e-mail to present bills and collect payments.

 EDI (Electronic Data Interchange) An older form of electronic communication of business transactions. EDI established a rigorous format for exchanging trade-related documents including purchase orders, invoices and
Electronic Funds Transfer (EFTs) in a standard format. Fairly expensive to implement, EDI has largely been suplanted by much cheaper XML based communications standards.

 Exception - A transaction that cannot be handled by the usual automated processes. Typically exceptions are handed over to human intervention for resolution. Excepetions are exprensive to resolve and most systems strive to reduce exceptions to bare minimum.

 EFT (Electronic funds transfer) -  electronic payments made via an Automated Clearing House (ACH). Much more common than EBPP, EFT systems take care of the payment end of billing allowing payments to be made on-line.The Federal Reserve's Fedwire and MasterCard's Remittance Processing System (RPS) are two examples. EFTs may also be made directly to a merchant (point-to-point) by transferring data directly to the merchant (by fax, tape or modem) with a single, aggregate ACH or wire transfer payment. Long touted as the future of banking, EFT/ACH has not yet taken off as fast as was predicted and thus remains a relatively small component of the flow of cash in America today.

 Electronic Check - Electronic replacements for paper checks. In an electronic checkbook, pens and signatures are replaced by signature card functions and digital signatures and stamps and envelopes by electronic mail or other communications options such as the Internet.

 Encoding a Check - Entering the amount of the check into the MICR line at the bottom of the check.

 Enhanced Electronic Check Presentment (EECP) - In this approach, paper is captured via image technology at the bank of first deposit. The check's code line and the image are separated. The code line is transmitted via ECP to the paying bank or the Federal Reserve. The image is forwarded separately. ECP is the non-image enhanced version of EECP in which a physical copy of the check follows the transmittal of the code line.

 Exception Item Processing - Exception files are the notes each bank creates daily indicating problem items including NSF (non-sufficient fund) items and invalid checks. A check imaging system can significantly speed the process of handling exception files by automatically locating the image of each exception item and displaying it in sequence along with a notation about the problem to the officer/operator to view and decide which items to pay or return.

 Federal Reserve - The central bank of the United States. The Fed comprises a seven-member Board of Governors in Washington, DC, twelve regional Federal Reserve Banks, and their 25 branches. The Fed carries out various system functions, including operating a nationwide payments system, distributing the Nation's currency and coin, supervising and regulating member banks and bank holding companies, and serving as banker for the U.5. Treasury.

 FedWire - The electronic funds transfer network operated by the Federal Reserve. FedWire is usually used to transfer large amounts of funds and U.S. government securities from one institution's account at the Federal Reserve to another institution's account it is also used by the U.S. Department of the Treasury and other federal agencies to collect and disburse funds.

 IBAC - Unhappy with the image quality of TIFF, IBM created its own proprietary check image format. IOCA (Image Object Content Architecture) is the image format that resulted, and ABIC (Adaptive Bilevel Image Compression) is the compression scheme. The results of IBM's approach produces a high-quality picture of the front and back for image statements plus a third, much smaller image for archiving. The average resulting check size is about 42,000 bytes.

 ICR (Intelligent Character Recognition) - A type of optical character recognition where letters and numbers written by a human can be read by a machine.

 Image Research - Using an imaging system to pull up a check or other imaged banking statement by customer, name, check number, or other item in the image index. Image research takes considerably less time than researching via microfilm or retrieving original documents from file cabinets.

 Image Statements - Bank statements that include representations of checks or other scanned documents. Electronic image statements make it easier to reconcile your account since you can see the entire check image - including name of the payee and memo - instead of just the date and check amount as on a traditional statement.JPEG As its name implies, JPEG (Joint Photographic Experts Group) was originally developed to compress color photographic images. It is now widely used in the banking arena to compress TIFF images.

 Legal Amount of Check - The amount of a check written out in script (for example, "fourteen dollars and 32 cents"). Usually entered on the center line of the check.

 Lock Box - A mail-in payment processing system offered by commercial banks and service bureaus to large corporations. Lockbox processors set up special post office zip codes that can receive a company's mail and/or electronic payments and deposits directly. The bank processes these payments directly, usually providing the corporate customer with electronic transmittals providing details such as who paid what and when. Wholesale lockboxes serve high-dollar, business-to business transactions, while Retail lockbox operations are much higher in volume customer to corporation payments.

 MICR (Magnetic Ink Character Recognition) - Type of recognition that relies on detecting characters that have been machine-printed in magnetic ink to rigid specifications. The distinctive shape of each character and the amount of magnetic material in the ink are strictly defined by ANSI. The common classes of MICR font (E-13B and CMC7) are also readable using image-based recognition. MICR fonts can be read at high speed with an extremely high degree of accuracy by electronic data processing systems at very little cost per check.

 MICR line - The row of characters printed in machine readable magnetic ink at the bottom of each check. Part of this MICR line identifies the issuing bank and the check number and is usually preprinted on the check. The face value of the check is typed into the far right of the MICR line before that check is routed back to the issuing bank. This allows the check to be recognized cheaply and easily by the Federal Reserve in order to forward it back to the bank on which it was drawn.

 Misread - A mistake made by a recognition system in interpreting a character, field, or document.

 OCR (Optical Character Recognition) - The automatic machine reading and of printed material and translation into ASCII or other recognized alphanumeric standard..

 On-Line Bank Statements - Like your monthly paper bank statement, on-line banking statments provide the customer with a listing of checks cashed, deposts made and interest and bank expenses accrued.

On-line bank statements are frquently linked to an on-line payment system that allows consumers to pay bills electronically. They are not typically linked to an EBPP system. Lots of consumers are already paying their bills on-line, but most of those bills are still deliverd as paper documents.

 On-Us Checks - Checks drawn and deposited from the local bank.

 Paper-To-Follow - Instances in which the paper check or other banking document must be forwarded after an image or data detailing specifics about that check or document have already been transmitted.

 Payment System - Any system used for moving funds, payments, and money between financial institutions. In U.S., the Federal Reserve plays a major role in moving funds, but a variety of private organizations also perform payments system functions as well.

 POD (Proof of Deposit) - Matching the amount on the courtesy line of the check against the deposit slip, an electronic record or other form of record.

 Positive Pay - A system that provides companies with a way to notify their bank of the checks written, check numbers, amounts, accounts, etc. This way, the bank can scrutinize all payments received against this information to check their validity. Positive pay provides a powerful weapon against fraud, allowing accounts to be reconciled quickly against items as they are being cleared.

 Power Encode - Any MlCRline-encoding process that is automatically generated by an imaging or other automatic check processing system.

 Reader/Sorter - A device that reads the MlCRline, then sorts checks (usually by the bank issuing them) into separate piles. For example, the IBM 3890/XP Reader Sorter.

 Reject - A character, field, or document that the recognition system is unable to recog Size.

 Reject Rate - The percentage of the total items to be recognized that the recognition system knows it cannot identify.

 Reject Repair - Repairing misprinted information entered into a check's MICR line.

Remittance - a payment, usually accompanied by a stub which details what the payment is for.

Remittance Processing - the collection, processing, and posting of payments.

 Remittance Processing and Lockbox - See Lockbox

 Routing Number - A numbering system printed on the bottom MlCRline of the check that identifies a particular bank.

 Scenic Check - A type of check that portrays a scene or colorful pattern.

 Single Pocket Proof Machine - A machine that enters MICR information on the bottom of the check. Because this sort of machine has a single pocket, it cannot sort the checks into different piles according to the banks on which they are drawn. Thus, they are either on-us checks or will have to be passed to a reader/sorter for further processing.

Stub -- an itemized list of what is being paid and by whom. Originally stubs were the tear-off portion of an invoice or statement, which was returned with the check. These days the defintion is extended to any record that is returned along with the payment which details what the payment is for. Stubs typicaly include the customer account number, and the amount owed.

 Statement Rendering - Creating a customer statement or a report that details transactions for a fixed period, usually a month.

 Transaction Processing - Characterized by high volumes and workflow orientation, transaction processing involves setting up automated procedures for handling commonly repeated tasks. Work is passed automatically from worker to worker in assembly-line fashion. For example, in check processing, one group of operators or automatic routines might process all checks, while item repair and balancing occurs at a different stage of the game. This is contrasted to store and retrieve where volumes are low and inquiries are random. Although relatively new to banks, insurance companies have used transaction processing systems for years to process claims.

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