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Banking Special Issue: Relationship Banking

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

Relationship Banking

CDs and Image Statements change the face of banking

by Joe Devlin

"These days, banks offer better cash management tools, image statements, CD statements and on-line access to check images to retain existing customers, attract new clients, maybe even to generate new income. We call this relationship banking."

Thierry Leger, marketing v.p. at IA Corp.

Imaging VARs are discovering that CD bank statements are an easy sell in the banking market.


Check Image Statements

A recent study by the Tower Group, a Wellesley, MA based research consulting firm, reports that more than 400 financial institutions nationwide have already adopted image statements. There are many reasons why image statements are usually the first imaging solutions banks implement. Image statements are monthly bank statements in which imaged representations of checks and deposit slips replace the actual checks. Image statements appeal both to banks and to banking clients.

Customers like image statements because they are compact, visually appealing, and simplify balancing the checkbook. Checks and deposits appear in numerical order, making it easier to reconcile accounts. Gone are the days of shuffling and rearranging piles of checks. They are depicted next to the dollar amounts, making it easier to catch discrepancies.

Printing Choices

An imaging system must capture both sides of each check and the accompanying deposit slip if the bank plans to destroy the originals. At month's end, the system retrieves the check images for each account and prints them in order on the statement. The printing process is automated, making it a simple matter to create individual statements for each customer.

Image statements sent to customers with personal checking accounts typically include just the front of the check, assuming that is all the customer wants to see. Image statements for commercial accounts, on the other hand, usually include both sides of the check. Including images of the deposit slips on the statement is another option. A typical statement format displays twelve checks per page.

Since all the printing is under computer control, however, it is relatively easy to create custom formats for special customers. For example, many banks print checks in a two checks per page enlarged version for visually impaired customers.

Banks like image statements because they are cheaper to prepare and cost less to mail. The biggest cost savings from the bank's perspective is that check-item research is much faster and cheaper Once check images have been captured and saved in computer storage, checks can be retrieved for customers in seconds. Goodbye to the five minute microfiche lookups and the calls to the records department to have them fax you copies of the checks.

Rethinking Postal Methods

Banks need to rethink postal methods when they move to image statements. Different postal handling equipment may be needed to stuff the new lighter, flatter image statements. In addition, to achieve the lowest pre-sort postage rate, the bank must have at least 500 mailing pieces. Small banks may need to change or combine statement cycles to achieve this number.

Resistance to image statements has not been vigorous, according to Tom Houston, a certified imaging consultant and president of Atlanta-based Cabbage Mountain Image Consultants. "Interestingly, hold-outs tend not to be senior citizens but baby boomers in the 35 to 45 age group," Houston observes. He advises banks not to knuckle under to customer demands to keep their paper checks.

You might call it Houston's fundamental rule of image statements - don't offer a choice. "The most important marketing rule a bank must follow when introducing image statements is don't let your customers choose," says Houston. "Every successful and unsuccessful bank has validated this rule. All interactions and correspondence with customers should emphasize the many benefits of check images. Banks that stick to the hard-line of 'this is the new system, it is better and the only option' find that they lose a minuscule number of customers. Banks that offer customers a choice of paper or image statement invariably regret this decision."

Houston admits that not every bank he advises follows this rule to the letter. Rather than lose a few customers, some banks knuckle under and make exceptions, mailing out checks to those few who seriously look like they would otherwise defect to another bank. Doing so causes a lot of extra work for the back office and, unless the account retained is a really large one, rarely makes good financial sense.

CD Statements - 32,500 Checks on a CD

"Once you have captured check images, you will find there are all kinds of services that can be spun off to generate fees. CD statements are the best example of such a spin-off product," says Thierry Leger of IA Corp.

Dealing with large volumes of paper checks is a real pain. That's why corporate customers love CD statements so dearly. CD statements take the work done to create image statements one step further. Why print the image statement for the corporate customer when you can provide them with a CD full of indexed check images? Each image is indexed with all the data that is provided on the MICR line of the check. This allows bank customers to search for data and images by categories such as check number, item amount, date, and customer name. That way, the corporation can print own statements or it can use the CD as a research tool to search and sort through the image statement any way it likes.

Using current CD-R technology, it costs a bank about $10 per disk to print a single custom CD. That puts CD statements out of the reach of the home banking market, but well within a corporate budget. CD statements are often listed as potential moneymaking propositions, but most banks give them free of charge to corporate customers as a relationship banking item.

Lots of banks are aggressively marketing image CDs," says Leger. "They may start off pushing CDs to acquire or keep customers, but when they find themselves swamped with hundreds of orders for these CDs, they are quite happy to accept the money the new service generates as well."

Image statements may create some initial difficulty for customers used to sorting hundreds of checks. "One of the problems with imaged statements is that once you convert to check images, your clients will no longer be able to separate their checks into little stacks at the end of the year for tax preparation," says Tom Houston.

"A CEO I know in Tennessee suggested maybe we should send out little pairs of scissors to go with the little pictures of checks on the statements. Customers could cut out the checks and still make their little piles," says Houston.

CD statements solve part of this problem because they deliver check images in machine sortable formats. Many small-to-medium companies use simple programs like Quicken for their accounting and financial report information. A good Visual Basic or database programmer can write a program to filter data and images from the CD and dump it into Quicken or Excel in a day or two.

Alternately, imaging VARs can build applications using one of the finance-aware imaging applications now emerging. One example is Document Solutions' Financial Insight program. "Financial Insight is being marketed as a financial reporting package, but in the right hands it can also serve as an image-enabled general ledger system for small businesses and retail customers," says Houston.

The hook is that banks are beginning to capture category codes off checks and use them to provide better indexing schemes. Programs like Financial Insight can be set to automatically compare category codes against the company's chart of accounts, thus allowing for the automatic organization of incoming checks by customer or expense category. "It is a nascent market, with relatively immature software but huge potential," says Houston. "Just the sort of market opportunity good resellers keep their eyes open for."


Board members always ask about the legality of optical media. When they do, be sure to point out that the IRS is the biggest user of optical media.

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