Computerworld
Quick Menu
Search



Ads by TechWords

See your link here


Subscribe to our e-mail newsletters
For more info on a specific newsletter, click the title. Details will be displayed in a new window.
Finance
Computerworld Daily News (First Look and Wrap-Up)
Computerworld Blogs Newsletter
The Weekly Top 10
More E-Mail Newsletters 
Computerworld 2007Subscribe to Computerworld
40 years of the most authoritative source of news and information for IT leaders.

Checkpoint for Check 21

A federal law paving the way for electronic check imaging goes into effect tomorrow
 

Sign up to receive Legislation/Regulation Resource Alerts

October 25, 2004 (Computerworld) -- This week, U.S. banks will reach the first mandated milestone on the way to what's arguably the biggest change in the way they process checks since the introduction of magnetic ink character recognition almost a half-century ago.


On Oct. 28, the Check Clearing for the 21st Century Act, or Check 21, will require that banks accept paper documents with check images and data related to transactions in lieu of original paper checks, which, once digitized, can then be destroyed.


The image replacement documents (IRD) will also allow banks to transmit check images electronically, eliminating the need to ship paper checks around the country for clearance and settlement.


The legislation doesn't force financial institutions to exchange IRDs electronically. However, most large banks are already well on their way to upgrading their front-end systems for electronic check-image capture and back-end processing systems in order to take advantage of the efficiencies that electronic IRD processing will create.


Check 21 was proposed to reduce paper handling, collection time, clearing expenses and fraud while improving fund availability and the collection of nonsufficient-fund items. But some institutions have raised concerns about the changes, primarily those related to the high cost of new systems and the increased potential for fraud. For example, IRDs lack security features that are available on paper checks, such as watermarks.


But there's no need for companies to panic because of the impending deadline, say many in the industry involved in orchestrating the transition.


"There are a lot of people who are all gloom and doom about what's going to happen on Oct. 28, but this is an evolutionary process that has got to fit together many pieces," says John Feldman, an image transactions executive in the technology and operations group of Bank of America Corp. in Charlotte, N.C. "I believe it'll be years before the industry reaches image exchange volume."


Bank of America has made investments in check-scanning devices and imaging technology and is evaluating whether to roll out that technology in its branches, automated teller machines and regional check-processing centers, says Feldman.


Nuts and Bolts


Most of the nation's top 50 banks have made significant investments in imaging technology, experts say, but they have yet to purchase systems to send check images to other banks or integrate back-end systems that will process check images. Individual banks will likely spend anywhere from $5 million to upgrade imaging software to $100 million to rip out entire back-end processing systems.


Most back-end bank systems are still mainframe-centric. They are made up of a collection of computers and software that developed over time and in many cases never evolved to handle image exchange, experts say.
There's also a lot of legacy code that needs to be upgraded to make use of the new check images that will be available, says Ed Herman, director of the payments portfolio at Electronic Data Systems Corp.
"There's a collection of back-end systems that would have to be upgraded, integrated, replaced," Herman says. "Over the past 60 or 70 years, [banks have] fine-tuned their paper processing systems. All that is now going to have to change, or at least be integrated differently."

Continued...
1 | 2 | 3 | 4 | NEXT  



Print this Story Send Us Feedback E-mail this Story Digg! Digg this Story Slashdot this Story
"Welcome to a special IT Blogwatch EXTRA: watching bloggers' reactions to the latest spectacular development in the standards war over..." Read more...
"Stephen Spoonamore offers more details on what I was trying to drive home in my recent column: Because individual votes..." Read more...
Read more Government & Regulation posts or See all Blogs
IBM launches Bluehouse, a Facebook for business
iPhone grabs top smart phone spot
Oracle tries to step up on high-end databases
More top stories...
Microsoft scales out SQL Server 2008, wants to 'democratize BI'
Virtual Headaches
Filters on in-flight Wi-Fi may be just the start
Too much junk food, too little exercise and a 24/7 tether to technology? Your body ain't happy, friend. Let us count the pains.
Instruments on the surface of Mars have detected falling snow that is likely evaporating before it reaches the planet.
One positive development stemming from the collapse of Wall Street may be a boost in interest in computer science and IT careers among students who were previously interested in financial services jobs.
Getting new software installed on Linux doesn't have to be hard, but it can differ depending on what you're installing.
Reviews, analyses, how-tos, visual tours, hot issues and predictions about Microsoft's new OS.
Four years from now, the IT field will be a vastly different place. Will you be ready?
All Zones
Application Performance Zone
Business Continuity Zone
The File Data Management Zone
Security Management Zone
The SAS Zone
Business Intelligence and Analytics Zone
Windows Protection Zone
The Enterprise Search Zone
Software as a Service Zone

Ads by TechWords

See your link here
Computerworld Executive Briefing: The Compliance Era
Get this briefing free (a $195 value), for a limited time, courtesy of VeriSign.
The new Computerworld report, The Compliance Era, explains why regulatory compliance has zoomed to the top of the IT agenda and shows how real-world IT executives are dealing with the storage, security and privacy challenges. Get this briefing free (a $195 value), for a limited time, courtesy of VeriSign.
Download this executive briefing download
From Laggard to Leader: Transforming the Data Center
From Laggard to Leader: Transforming the Data Center
Register for this complimentary webcast today!
Go to the webcast 
WINNING THE PCI COMPLIANCE BATTLE
A Guide for Merchants and Member Service Providers
Get this white paper now!
This white paper explores the compliance requirements for PCI data security and helps online merchants select a PCI compliance service vendor. It also introduces QualysGuard PCI, which helps online merchants scan and remediate vulnerabilities, and submit PCI compliance status directly to their acquiring banks via its "auto-submission" feature.
Download this white paper go
White Papers
Read up on the latest ideas and technologies from companies that sell hardware, software and services.
Project Portfolio Management - Boost the value of IT
Core Network Services Survey: The Costs and Impacts of DNS and IP Address Management
Six Project Metrics Every CIO Should Know for Application Delivery Success
View more whitepapers