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Startup Statistics State of solutions Customer experiences
Today Experience good/bad/lessons learned
Future Shifting Payments and the Silo Meltdown
Startup Statistics State of solutions Customer experiences
Today Experience good/bad/lessons learned
Future Shifting Payments and the Silo Meltdown
Image Capture
Image Archive Largely Mature: Most all Banks have some solution in place in these areas.
Mature to moderately mature at Industry leaders. Less mature at followers. Re-engineering still to be done in many banks.
Pilot solutions, no major commitments, paper still follows.
Startup – State of Payments
Startup – State of Payments
Electronic Check Presentment (ECP)
Process Re-engineering (Day 2 and Services)Process Re-engineering (Day 2 and Services)
Image Product IntroductionImage Product Introduction
POP Transaction ElectronificationPOP Transaction Electronification
Generally lower volume, data only, with paper to follow.
StartupStartup
Statisticsa few brave “early
adopters”Pilots, low volumeFocus on Forward-
Presentment
Statisticsa few brave “early
adopters”Pilots, low volumeFocus on Forward-
Presentment
StartupStartup
Expectations (from BAI Survey 2004) “Two-thirds of the respondents believed
that one of the highest payoffs from Check 21 would come from faster funds collection”
“More than half believed that reductions in transportation costs would be another big payoff”
“More than half the respondents expected more efficient processing also would be among the highest payoffs”
All expected new product offerings to result
Expectations (from BAI Survey 2004) “Two-thirds of the respondents believed
that one of the highest payoffs from Check 21 would come from faster funds collection”
“More than half believed that reductions in transportation costs would be another big payoff”
“More than half the respondents expected more efficient processing also would be among the highest payoffs”
All expected new product offerings to result
StartupStartup
Solution OfferingsTactical solutions most often selected
Financial Institutions hesitant to make major investment
Initial reliance on existing, proven technology
ECPLegacy Item Processing
Immature definition forced early adopters to look for solutions that address a gamut of possibilities
Solution OfferingsTactical solutions most often selected
Financial Institutions hesitant to make major investment
Initial reliance on existing, proven technology
ECPLegacy Item Processing
Immature definition forced early adopters to look for solutions that address a gamut of possibilities
StartupStartup
What did we miss? Rollout not as progressive as anticipated Legal worries Regulations too vague to deal with image Surprise – in most cases, paper was moving
as well as image Current infrastructure not conducive to
exchange, but very controlled New infrastructure built for image, but
implementation of controls falling behind Many have stepped into solutions without a
complete view of requirements
What did we miss? Rollout not as progressive as anticipated Legal worries Regulations too vague to deal with image Surprise – in most cases, paper was moving
as well as image Current infrastructure not conducive to
exchange, but very controlled New infrastructure built for image, but
implementation of controls falling behind Many have stepped into solutions without a
complete view of requirements
StartupStartup
Networks – which one do I use? SVPCo Viewpointe Endpoint Exchange Federal Reserve Direct Send
Once I choose, how do I settle? What kind of images do I use?
What happens when something goes wrong?
Networks – which one do I use? SVPCo Viewpointe Endpoint Exchange Federal Reserve Direct Send
Once I choose, how do I settle? What kind of images do I use?
What happens when something goes wrong?
Customer ExperiencesCustomer Experiences
Exchange Low volume, account level Highlighted back office and Day 2 deficiencies
Forward Presentment IRDs Successful, particularly west to east
Settlement Difficult at first, matured through use of NCHA
Exceptions Image Quality, not the nightmare expected Returns, remain manual
Exchange Low volume, account level Highlighted back office and Day 2 deficiencies
Forward Presentment IRDs Successful, particularly west to east
Settlement Difficult at first, matured through use of NCHA
Exceptions Image Quality, not the nightmare expected Returns, remain manual
State of TodayState of Today“A year after the Check Clearing for the 21st Century Act took effect, and supposedly triggered a race to use image exchange networks, many bankers are still at the starting blocks.” American Banker
“A year after the Check Clearing for the 21st Century Act took effect, and supposedly triggered a race to use image exchange networks, many bankers are still at the starting blocks.” American Banker
Image Capture
Image Archive Largely Mature: Most all Banks have some solution in place in these areas.
Mature to moderately mature at Industry leaders. Less mature at followers. Re-engineering still to be done in many banks.
Pilot or scaling solution at leaders. Followers are in evaluation or pre-commit position.
Today – State of PaymentsToday – State of Payments
Electronic Check Presentment (ECP)
Process Re-engineering (Day 2 and Services)Process Re-engineering (Day 2 and Services)
Image Product IntroductionImage Product Introduction
POP Transaction ElectronificationPOP Transaction Electronification
Generally lower volume, data only, with paper to follow.
Image ExchangeImage Exchange
State of TodayState of Today
StatisticsIRD Creation
FED 1.8m+ per dayEDS ~1m+ per dayMultiple other sources
ExchangeVolume low, but on the riseSVPCo 240,000 images per dayViewpointe – current low volumes, but…Endpoint Exchange 3,500 banks live
(8m:sept)
StatisticsIRD Creation
FED 1.8m+ per dayEDS ~1m+ per dayMultiple other sources
ExchangeVolume low, but on the riseSVPCo 240,000 images per dayViewpointe – current low volumes, but…Endpoint Exchange 3,500 banks live
(8m:sept)
State of Today – Federal Reserve
State of Today – Federal Reserve
Product usage: FedForward: 200 ICL customers; 200 paper-
to-image customers FedReturn : 3 customers depositing
FedReturn image cash letter FedReceipt : 4 customers receiving image
cash letters as presentment Projections:
100,000 new items per day per month through year end 2006
20% of Check 21 presentments will be via FedReceipt or FedReceipt Plus by year end 2006 (currently .01%)
Product usage: FedForward: 200 ICL customers; 200 paper-
to-image customers FedReturn : 3 customers depositing
FedReturn image cash letter FedReceipt : 4 customers receiving image
cash letters as presentment Projections:
100,000 new items per day per month through year end 2006
20% of Check 21 presentments will be via FedReceipt or FedReceipt Plus by year end 2006 (currently .01%)
Federal Reserve IRD Volume
40,000
165,000
720,000
1,047,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Nov. 2004 Feb. 2005 Jun. 2005 Aug. 2005
Federal Reserve IRD Average Value
$17,500 $17,576
$11,389
$9,360
$0
$2,000
$4,000
$6,000
$8,000
$10,000$12,000
$14,000
$16,000
$18,000
$20,000
Nov. 2004 Feb. 2005 Jun. 2005 Aug. 2005
State of TodayState of Today
TrendsImage Exchange Volume risingSubstitute Check Volume rising
Expected to plateau after 2007Methodologies are maturingPoint of Entry Impact
Corporate Capture and ATM Deposits
TrendsImage Exchange Volume risingSubstitute Check Volume rising
Expected to plateau after 2007Methodologies are maturingPoint of Entry Impact
Corporate Capture and ATM Deposits
State of TodayState of Today
SolutionsMaturingStrategic View, but siloedBank insistence on “best of breed”
Components, rather than end-to-endSubstitute Checks – when do they go
away?Methodology varies, but is being
rationalizedNetworks are maturing
SolutionsMaturingStrategic View, but siloedBank insistence on “best of breed”
Components, rather than end-to-endSubstitute Checks – when do they go
away?Methodology varies, but is being
rationalizedNetworks are maturing
State of TodayState of Today
Expected this… What happened? Mass adoption of exchange Use of substitute check as transition
instrument only Business case development around
exchange of images Image Formats Standards Image Security Features Fraud expected to be among the highest
risks of Check 21 Belief that Check 21 would increase
exposure to fraud
Expected this… What happened? Mass adoption of exchange Use of substitute check as transition
instrument only Business case development around
exchange of images Image Formats Standards Image Security Features Fraud expected to be among the highest
risks of Check 21 Belief that Check 21 would increase
exposure to fraud
State of TodayState of Today
Didn’t expect that… Substitute Checks
Multiple sends Duplicates Fraud (intentional and inadvertent) Business case windfall (especially east-west) Develop a life of their own
Slow adaptation of Exchange Lack of partners Low volumes leading to poor business
cases What downstream changes are required
when the paper not available?
Didn’t expect that… Substitute Checks
Multiple sends Duplicates Fraud (intentional and inadvertent) Business case windfall (especially east-west) Develop a life of their own
Slow adaptation of Exchange Lack of partners Low volumes leading to poor business
cases What downstream changes are required
when the paper not available?
Image Capture
Image Archive
Process Re-engineering (Day 2 and Services)Process Re-engineering (Day 2 and Services)
Image Product IntroductionImage Product Introduction
POP Transaction ElectronificationPOP Transaction Electronification
Image ExchangeImage Exchange
Payments ConvergencePayments Convergence
Shared CommodityShared Commodity
Largely Mature: Most all Banks have some solution in place in these areas.
Mature to moderately mature at Industry leaders. Less mature at followers. Re-engineering still to be done in many banks.
Pilot or scaling solution at leaders. Followers are in evaluation or pre-commit position.
Early days at majority of banks.Exploration or planning in process.
“reconstructing the check world”
Future – One Step at a Time
Future – One Step at a Time
SILO“something that is kept separate or
compartmentalized”
SILO“something that is kept separate or
compartmentalized”
CheckProcessing
Credit/DebitCard
Lockbox
ACH
CorporateDeposits
RetailBranch
Point of Sale
FutureFuture
OfferingsWill address multiple forms of
paymentWill integrate traditional Day 2
functions in-line, near real timeFraud DetectionExceptions identification
Vendor co-existence matures
OfferingsWill address multiple forms of
paymentWill integrate traditional Day 2
functions in-line, near real timeFraud DetectionExceptions identification
Vendor co-existence matures
FutureFuture
Convergence – The Silo MeltdownPaper vs Electronic vs ACH vs …Fraud DetectionPayments Tracking
Across silos“Batch of One” view
Convergence – The Silo MeltdownPaper vs Electronic vs ACH vs …Fraud DetectionPayments Tracking
Across silos“Batch of One” view
SummarySummary
Volume Trends to ContinuePayments view shiftingSilos Merging
Volume Trends to ContinuePayments view shiftingSilos Merging