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Market report
Imaging in banks
BY KATHERINE L. HOUSEFORM, Oct. 1994
After The Lamar Bank in Purvis, Miss., experienced explosive growth in the last few years, managers began to look for new reader/sorter equipment. When they first examined imaging systems for item processing, they knew nothing about the technology. But one year after installing the second bank imaging system in Mississippi and the first in Lamar's market area, management can't say enough good things about the system it dubbed ImageSmart™.
Lamar, a community bank with $150 million in assets and four locations, has accrued the following benefits:
- Reduced postage costs. Bank customers no longer receive copies of all canceled checks with checking account statements. Instead, they receive copies of the image-a digitized picture of each check-printed on blank white paper. This use of imaging is called image statement rendering.
- Improved customer service. When customers call the bank with a question about their account, bank employees can pull up the image of the front and back of a check instantly. If a customer requires copies, employees can fax them directly from their computers or print copies and mail them. Before imaging, employees had to request microfilm, a time and labor-intensive process. If the check in question had been processed recently, customers often had to wait several days until the bank received the current microfilm records.
- Increased check processing speed. The Lamar Bank uses an "image proof of deposit" system that still requires proof operators enter the dollar amount. However, power encoding, or the process of entering check amounts on a computer keyboard as check images appear on a monitor, is at least 25 percent faster than using single pocket proof machines, according to Kenneth Lott, senior vice president. Also, items no longer must be sent through the reader/sorter multiple times because checks do not require sorting by account to be mailed with each customer's statement.
- Increased speed in statement processing since checks no longer must be counted and stuffed in envelopes. When one employee moved, the bank did not need to replace her.
- Improved image to customers. By installing a new technology ahead of competitors, The Lamar Bank has established itself as a market leader knowledgeable about industry changes, according to Lott.
Who's Buying Imaging Systems?
The Lamar Bank is not alone. Although the number of installed imaging systems in banks is small, industry experts expect significant growth within the next few years. (See box on page 96.) Lamar's adoption of imaging demonstrates that the technology is not just for large banks.Imaging has multiple uses within financial institutions. Although the Lamar system automated the back end function of statement rendering, it also increased the speed of the encoding process through the image proof of deposit system and improved customer service through archiving of check images.
Some image proof of deposit systems do not require that check amounts be entered through power encoding. Instead, systems employing courtesy amount read (CAR technology) attempt to read the courtesy amount field on checks and multiple fields on internal documents, thus automating the front end, or "proof and encode" process. CAR technology can read the amount fields about half the time with an accuracy rate sometimes greater than that of a proof operator. CAR is especially accurate when reading typewritten or computer generated checks. (In these systems, much of the keying of data done by Lamar Bank employees would be eliminated.) CAR systems are necessary only in proof of deposit situations when checks come into the bank without being pre-encoded. Since CAR systems also capture an image of the entire check, they can be used for statement processing and archiving of images, but their primary benefit is automation of the proof department.
CAR systems are generally found in large banks since CAR capabilities are not available on some low-speed systems used by smaller banks. Although CAR systems currently are more widespread in larger banks, industry participants point out that community banks are accruing other benefits from imaging, especially in the customer service area. Because community banks have lower volumes, they can afford to keep three to six months of customer checks on-line to answer customer inquiries, which is when most requests occur, according to D. Trent Fleming, manager of technology consulting for Reynolds, Bone & Griesbeck, CPA, a Memphis, Tenn., consulting firm specializing in the financial industry. Larger banks may not be able to afford this, thus missing out on the customer service benefit that some imaging applications offer. Fleming's consulting firm has helped community banks choose imaging systems and has worked with printers to redesign documents compatible with those systems.
In addition, banks can use imaging for remittance/lock box processing to process customer bill payments. Some banks also use conventional document imaging systems to store and retrieve loan applications and documents about mortgages, trusts and IRAs to improve efficiencies and customer service. These systems more closely resemble imaging systems used in other businesses, such as insurance companies, and do not require a reader/sorter with imaging capabilities, often referred to as image-enabled equipment.
What Forms Professionals Need to Know
Before banks install imaging systems, their documents must be redesigned to make them image-friendly or image-ready. This means that some design elements will drop out when the document is digitized, making accuracy of CAR higher and viewing of documents on screen easier. The major check manufacturers already have redesigned checks, deposit slips and other forms to make them image-friendly. Standard Register also has begun a marketing campaign to let banks know it can redesign documents before they convert to imaging. (See box)"The situation is the same at it always is with anything new," says Stan Klarenbeek, vice president of sales and marketing of General Financial Supply, a manufacturer in Nevada, Iowa. "You don't want to be the last one on the block talking about this. If distributors are the last ones in the door knowledgeable about imaging, they will miss out on an opportunity." Klarenbeek describes imaging systems in banks as "a blessing for the forms industry," since they are helping transform high-volume commodity items into more technical ones where systems expertise is valued.
George Ellis Jr., CFC, president of Lawrence Printing Company Inc., a company in Greenwood, Miss., that supplies a lot of documents to The Lamar Bank, says his firm has helped about half a dozen banks make the conversion. "It seems like every day we get inquiries about it," says Ellis.
Forms professionals can begin talking with banking clients now to determine if imaging is being considered. Some banks and credit unions use service bureaus to process checks, and these centers may be converting to imaging too. Banks may convert documents to image-friendly ones before an imaging system is installed to get customers and employees accustomed to new forms. This also ensures the bank has the necessary documents ready when the equipment is delivered.
Katherine L. House is managing editor of FORM magazine.
Thanks to: Edward Borowski, manager of courtesy amount reader development, Unisys Corporation, Plymouth, Mich.; John Bray, architect of the Document Management System, AT&T Global Information Solutions, Waterloo, Ontario; Donald Harman, an independent consultant in Charlotte, N.C., who works with IBM; and Pat Koster, sales associate for Document Solutions Inc., an imaging software company headquartered in Birmingham, Ala., that specializes in the banking industry.
Industry at a Glance
Imaging in the Banking Industry
The Bank Administration Institute, Chicago, has included information about imaging in its check processing survey since 1988 because "image technology is expected to have a significant impact on check processing, as MICR once did." In the 1993 survey, 21 institutions or 19.3 percent of respondents said they used image technology in at least one area of check processing, up from 9.9 percent in 1992. As was the case in 1992, however, imaging is more likely to be "under discussion" than "currently in use" or "planned for implementation." For example, 68.5 percent of respondents said they were discussing using imaging for proof of deposit, while only 2.2 percent currently use it, 13.5 percent plan to use it and 15.8 percent had no interest in doing so.
In addition, the American Bankers Association 1994 Check Processing/Wholesale Operations Survey of 272 institutions showed less than 10 percent of surveyed banks use imaging. However, many institutions planned to do so, especially those with $1 billion or more in assets. Of banks that size, 24.2 percent said they planned to use imaging for proofing/encoding, 25.8 percent for prime capture/balancing, 21.2 percent for reject processing, 33.3 percent for statement processing.
SR Promotes Forms for Imaging Systems
Standard Register, a large manufacturer in Dayton, Ohio, is offering a program for financial institutions called the "Image Processing Conversion Plan." The program calls for Standard Register to redesign documents that will be processed by banks' imaging systems. Such "document re-engineering" can have a "significant impact" on a system's success, according to Bob Smith, manager of financial markets at Standard Register. "We've tried to educate the marketplace," says Smith. "Our financial reps have been working with customers and making them aware of the technology and the impact it is having on traditional MICR documents."
Standard Register is encouraging bank customers that have imaging task forces or project teams in place to begin a conversion of documents. As items come up for reorder or redesign, reps can help clients incorporate image-friendly design techniques. Standard Register has recently redesigned internal documents for Signet Bank, Richmond, Va., and Suffolk County National Bank on Long Island, even though that institution has not yet installed an imaging system.
In a 4-color brochure, "Image Processing Documents," SR outlines a 5-step plan for customers converting to an imaging system, with details on how Standard Register can help. It explains how Standard Register's "systems consultants" will do a forms survey to determine the number of documents affected, then establish a conversion schedule. End users should establish a multi-department forms committee to review various forms, then determine the order in which forms should be redesigned and reordered. The brochure says Standard Register will present a "custom-designed conversion plan" in a reference binder listing information such as the conversion timetable and documents affected.
The brochure tells end users that it has "worked closely with all the major manufacturers of image processing equipment to fully understand the critical specifications associated with this technology." Smith says Standard Register began talking to the leading vendors about printing requirements for their systems four to five years ago and continues to do so.
The brochure reads, in part, "Take the first step with Standard Register. The important thing to remember when converting to image processing is to centralize control of the transition process. By using one forms vendor, you can guarantee quality and consistency throughout your system." Independent distributors may want to adopt that marketing philosophy too as more banks convert to imaging systems for document processing.
Don't Stop with Redesigned Forms!
Banks converting to imaging systems undoubtedly will need marketing materials to promote the technology to customers. When The Lamar Bank in Purvis, Miss., converted to imaging, the bank printed adhesive name badges for employees that said, "Let's Talk About ImageSmart(tm)." In addition, it used tent cards in all branches at customer counters to promote the program.
To sell customers on image statements, The Lamar Bank provided 3-ring binders, a common practice, according to imaging industry experts. The binders are customized with the bank's name and contain a different index tab for each month to simplify filing and a custom insert explaining the program. Commercial customers received 3-inch binders; individuals got 1-inch binders. Customers received the binders at a bank branch after presenting coupons that had been mailed to them. The coupons enticed clients to make the conversion from traditional DDA statements to image statements by making them eligible to win a $100 savings bond in a drawing.
Learning More about Imaging
NBFA's "The Technology Puzzle" covers forms automation and imaging. The white paper (product code WPFAI) costs $49.95 for members and $89.95 for non-members. To order, call (703) 836-6224, ext. 148.
Learning More about Imaging
AIIM, the Association for Information and Image Management, offers a variety of publications and services about imaging, workflow and records management. For a product catalog or membership information, call (301) 587-8202 or write 1100 Wayne Ave., Suite 1100, Silver Spring, MD 20910.