How Check 21 Could Open Off-Premise ATMs for Deposits

When President Bush signed the Check Clearing for the 21st Century (Check 21) Act into law last month, he unleashed a flurry of activity among financial institutions and vendors looking for ways to take advantage of the law, which allows banks to exchange electronic images of checks instead of the paper originals. Now some observers think the law, which takes effect next October, will help open the off-premise ATM market to deposit-taking transactions, which account for about 10% of transactions on bank-located machines. Already, major ATM vendors like Dayton, Ohio-based NCR and Diebold Inc., North Canton, Ohio, are introducing machines that can take checks deposited without an envelope, image them, display the image on the screen and on the customer's receipt, and transmit the image to the depository bank's back office. “Check 21 will drive the industry to check truncation and to distributed capture,” says Joe Knicely, a vice president at NCR. But now electronic funds networks like Star are looking at check-taking opportunities at ATMs hooked up in stores and other so-called off-premise locations, which account for roughly two-thirds of the 350,000 machines installed in the U.S. Historically, these machines have been strictly cash dispensers, as retailers as well as independent sales organizations servicing the machines have wanted to hold down hardware and servicing costs. But now, with the ability transmit check images, the need to deal with paper is eliminated. The cost issue remains, as new machines with imaging capability and TCP/IP connectivity are required. But some think the incremental transaction volume may make the investment pay off. “Check 21 extends deposit reach (to off-premise ATMs),” says Kevin Carroll, manager for ATM product management at Concord EFS Financial Services Inc., Wilmington, Del., whose Star EFT network is working with one large, unnamed ISO to place machines with imaging capability. Star would route the images to the cardholder's bank. Carroll figures that within 18 months, anywhere from 1,000 to 1,500 ATMs with the hardware and software to capture and export check images will be installed at both banks and off-premise locations.