A Rising Imaging Tide Lifts ECCHO’s Roster Past the 1,000 Mark

As the electronic exchange of check images grows, so too does membership in the Electronic Check Clearing House Organization, or ECCHO, a Dallas-based nonprofit banking-industry group that develops rules for image exchange and electronic check presentment. ECCHO president and chief executive David Walker tells Digital Transactions News that membership more than doubled last year to 1,170 financial institutions from 561 at the end of 2006. “That's the largest [increase] in any year” since ECCHO was formed in 1990, Walker says. 2006 was no slouch of a year for ECCHO, either. The organization added 300 members to the 261 it had in 2005, a year in which it gained 220 members after ending 2004 with only 41. But 2008 could turn out to be ECCHO's biggest year of all, possibly ending with as many as 2,500 members, according to Walker. ECCHO finds most of its bank and credit-unions members through the efforts of partners called sponsoring organizations that have relationships with many financial institutions. SOs have formal agreements with ECCHO authorizing them to sign new members. Besides financial institutions, SOs include regional automated clearing house processors, banker's banks, corporate credit unions, and other entities. The ranks of SOs grew to 70 in 2007's fourth quarter from 40 a year earlier. According to Walker, ECCHO's growth is driven by two factors?greater interest in check image exchange in the wake of the Check Clearing Act for the 21st Century (Check 21), which took effect in late 2004, and, in contrast to the paper-check world, the lack of rules from government and the courts about how to allocate liabilities resulting from the collection and return of check images. “There isn't anything in the current statutory and regulatory laws that covers check-image exchange,” he says. “Most of the law is paper-based, it's not electronic-based. Therefore you need to have some sort of agreement in place in order to do check-image exchange.” To fill that gap, financial institutions wanting to exchange check images need to create bilateral or multilateral agreements among themselves, a cumbersome process, or turn to a rules-setting organization such as ECCHO, he says. The largest group within ECCHO's membership, 378 financial institutions, has deposits in the $100 million to $500 million range. Financial institutions in the second-largest group, 289 members, have average deposits of under $50 million. Eight members have deposits of more than $100 billion. In October, the latest month for which ECCHO has complete data, average daily image volume grew to 34.4 million, up more than 250% from about 10 million a year earlier. Total image-based clearing volume hit 1.07 billion, with 71% cleared as images. The remainder was cleared through substitute checks formally known as image-replacement documents. These IRDs are paper printouts of checks provided for under Check 21 and used by banks not equipped to receive electronic check images from banks of first deposit. The number of image-receiving routing-and-transit numbers grew to 11,536 in October, nearly double the 5,841 R/Ts in October 2006. The latest R/Ts represent 7,800 actual financial institutions, which ECCHO says means that 47% of U.S. financial institutions are now receiving check images.