New Products Could Spur Holdouts to Jump into Image Exchange

Viewpointe Archive Services LLC this week introduced two products that, the company says, respond to rising volumes of imaged checks and could smooth the way for more financial institutions to participate in end-to-end image exchange. One of the products catches mismatches between check images and the data contained in associated files. The other automates settlement entries for image deposits and is aimed in particular at large-dollar items. While standardized statistics for mismatches industrywide are hard to come by, the problem is apparently getting worse as image volumes steadily climb. Some 1.22 billion items flowed through image-exchange networks in October, up from 428 million in November 2006, according to the Dallas-based Electronic Check Clearing House Organization, which formulates rules for image exchange. A little more than three quarters of this volume was cleared by image at paying banks, with the remainder requiring a substitute check, which is a paper printout of an image. The problem arises when the information contained in image data files varies from the MICR line data on the associated images themselves. The problem can stem from a number of mishaps, including sorter jams and keying errors (typing a “7” instead of a “1,” for example). In any case, the mismatches can cause headaches ranging from delays in posting to privacy breaches when images belonging to one account become visible to customers using another, unrelated account, Viewpointe says. Up to now, banks have relied on image-quality engines to weed out data mismatches. But these systems were designed to detect problems with the legibility of the images themselves, not to compare images with associated data files, says Diane Scott, chief sales, marketing, and product officer at New York City-based Viewpointe, which operates both an image-exchange network and a massive archive of check images. “The quality products, ours included, just weren't doing the job,” she says. In tests Viewpointe ran last year, the new image-integrity product detected 100% of mismatches in the test file, compared with 28% for the company's image-quality product, which has since been discontinued. Viewpointe also announced an enhancement to its automated settlement entry (ASE) system, a product it first announced a year ago in conjunction with PaymentsNation, a check clearing house. Last year, Viewpointe acquired PaymentsNation in part to gain control of its electronic settlement capability (Digital Transactions News, Sept. 8, 2008). With the improvement to the ASE system, any two banks using Viewpointe's network can have Viewpointe automate the business rules the banks have agreed upon for settlement deadlines. If any file misses a deadline, the system holds it until the next window as defined by the agreement. This helps avoid costly settlement reversals that become necessary when items are presented after agreed-upon cutoffs, Viewpointe says. “It's saving time and money,” says Scott. This capability is especially important, she says, as banks seek finer control over their float costs. “What we heard after the product went to market [last year] was that the real need was around higher dollar-value items,” she says. Aaron McPherson, research director at Framingham, Mass.-based researcher Financial Insights, sees the product ultimately being used to better control funds movements to take advantage of higher-return uses for the money. “In the future, you'll be able to connect [ASE] up to real-time data feeds to make sure the funds are there but not sitting around,” he says. “You want to time your settlements to maximize the time funds are in a higher-paying vehicle.” The availability of both image integrity and automated settlement could encourage more financial institutions to participate in end-to-end, fully electronic image exchange, McPherson says. In such exchanges, paying banks clear all images they receive rather than requiring substitute checks. “It's an important step along the way so more financial institutions will jump on board,” he notes. Scott says a “healthy following” of financial institutions were waiting for the results of Viewpointe's tests for the image-integrity product. That group, she says, “is turning into a healthy pipeline for us,” though she won't name any signed clients. The product is priced on a per-transaction basis depending on volume, but in any case the cost is less than a penny per item, Scott says. ASE is available at no fee to users of Viewpointe's image-exchange and settlement services.