Consolidation of Key Components Yields Comprehensive, Streamlined Item Processing Solution

ImagePoint, Bluepoint’s image-based item processing solution, allows financial institutions to take full advantage of Check 21 legislation through sophisticated incoming and outgoing central image exchange. Due to the integration of several major components from Bluepoint’s existing product line with the highly advanced functionalities from the ImagePoint product, the release of ImagePoint version 3.5 yields a streamlined Item Processing solution with greater technological strength and functional depth. Significant features included in this comprehensive version release are:

• Sort Pattern Studio - virtually sorts items to destination endpoints using a sophisticated sort pattern utility. Provides the ability to execute simple RT-based routing up to complicated least cost routing, based on multiple factors. Eliminates the need for paper item processing and the large sorters required for this task.
• Workflow Manager - streamlines processing and automatic workflow management with new workflows, configurable to a financial institution’s environment. Simplifies the task of monitoring and managing the flow of information through the system.
• FedReturn & Receipt - sends mixed return image cash letters to the Federal Reserve by interfacing to FedReturn and accepting return image cash letters. Multiple file output formats now include the latest SOP 4.8 posting format, improving compatibility with most core processing systems.
• SmartClient support for Microsoft Windows - combines the reach of the Internet with the power of local computing hardware allowing financial institutions to operate in an SaaS environment. Smart clients may be deployed and updated in real time over the network from a centralized server.
• File Processing - improves image exchange file processing speed by over 50%. This feature also includes numerous item level enhancements such as TIFF tag validation and repair, missing image detection and MICR/OCR mismatch detection. A broad range of file and item level processing validation criteria may be enabled, allowing financial institutions to proactively monitor and correct image exchange files that may have been received with errors, ensuring proper file integrity for all exchange partners.

As the first Bluepoint release of ImagePoint since the company acquired the product’s creator, Avalon International, this version marks a milestone for the company and its customers by providing an integrated product line focused on innovation. ImagePoint version 3.5 maintains the flexibility and modularity of a comprehensive item processing solution, while advancing the technology it was built upon. The ImagePoint solution is a highly efficient and cost effective complement to Bluepoint’s RDC Check 21 capture solutions. Together they deliver a true, end-to-end, Check 21 image-based item capture and payment processing solution for small and large financial institutions.

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Financial Credit Union pioneers teller check image capture, leveraging the possibilities available under Check 21.

BY DIANE FRANKLIN, CU Management Magazine/March 2008

It’s been just a little over three years since the Check Clearing for the 21st Century Act, aka Check 21, went into effect on Oct. 28, 2004. This law eliminates many of the barriers that were standing in the way of truncated check processing, by allowing the creation of a new negotiable document, an electronic record called a substitute check. The substitute check takes the place of the original check and allows check information to be processed electronically.

One early adopter of technology that takes full advantage of Check 21 efficiencies is one of the largest credit unions in the nation, $1.7 billion, 180,000-member Grow Financial Federal Credit Union (www.grow financial.org), Tampa, Fla. The CU also is one of the first financial institutions in the United States to implement software that captures and processes deposited checks at the teller line in real time.

This point-of-presentment system has been in place at Grow Financial FCU’s 18 branches for well over a year and a half. By all accounts, it has been a phenomenal success for the credit union.

THE DECISION

Many months before Check 21 law officially went into effect, Grow Financial FCU (founded in 1955 as MacDill Air Force Base Federal Credit Union) started investigating what electronic check processing technology could do for the credit union and its membership, which includes more than 1,100 SEGs, active and retired military personnel, and civilian employees at MacDill AFB.

“Our two primary driving forces for Check 21 pro cessing were reduction of float time, which would provide additional interest income, and reduction in fraud due to quicker check processing and notification of return items,” explains Beth Griffin, VP/finance, who investigated the financial implications of the technology along with SVP/ Chief Financial Officer Gail Wean. “Our check processing at the time was very inefficient. It could take up to three days to deposit checks received over the teller line.”

Wean likewise saw this new technology as a way to take the inefficiencies out of the check processing system in place at the credit union. “For 11 years, from the first day I arrived here, I knew there had to be a better way,” she reports. “The bottom line was to become more efficient and keep members happy at the same time.” While investigating this new technology, Wean and Griffin discovered that more efficient check processing, as permitted by Check 21 legislation, could reap the credit union upwards of $350,000 in additional interest income. “Gail and Beth did a thorough financial analysis and what we found out was that there was a lot of money being left on the table,” reports SVP/Chief Information Officer Brad Sears. “Recouping that income became one of our primary motivations moving forward.”

To maximize the benefits permitted by Check 21, Grow Financial FCU decided to pursue the idea of ini tiating electronic presentment rather than just being on the receiving end of substitute checks. This would allow the CU to take maximum advantage of the float-time reduction and fraud curtailment that had been identified as key goals.

Fortunately, there was a convenient source available that would allow Grow Financial FCU to meet the Check 21 objectives it had laid out: Southwest Corporate Credit Union (www.swcorp.org) of Plano, Texas.

A member of Southwest Corporate CU, Grow Financial FCU was already using the corporate credit union’s share draft processing service. And, as it so happened, the corporate was working in conjunction with CUES Supplier member Bluepoint Solutions (www.blue pointsolutions.com), a document management and Check 21 solutions provider based in Vista, Calif., to bring groundbreaking technology to its credit union members. Bluepoint would provide the desktop software solution, while Southwest Corporate CU would develop the back-end server solution to provide real-time pro cessing of the check image data provided by the CU.

Grow Financial FCU first began focusing on Southwest Corporate CU Batch Capture, a digital imaging solution for the back-counter and back-office environment. “We did a site visit and were impressed with the process,” Griffin reports.

During its investigative process, however, Grow Financial FCU was presented with a very interesting opportunity: to be the beta site for a new product known as Teller Capture, being offered by Southwest Corporate CU in partnership with Bluepoint Solutions.

An advantage of this option was that it would allow the capture and processing of checks at the teller line, so the check would clear faster and there would be no need to capture the checks in a batch at the end of the day.

This option was also attractive to Grow Financial FCU because tellers would be able to balance their cash drawers much more quickly at the end of the day. Another advantage was the integration with Bluepoint’s Receipt Manager, which produces an electronic paperless record of every transaction and also makes it easy to use transaction data for research purposes. (Receipt Manager is not required to support Check 21.)

Grow Financial FCU saw this as an opportunity to be on the leading edge, using technology developed by a company with a proven track record implementing its Batch Capture product. “We realized that we were taking a bit of a risk to be a beta test site for Teller Capture,” Sears acknowledges, “but having seen that other credit unions successfully adopted another solution from the same provider, we felt it was a prudent decision.”

THE IMPLEMENTATION

As the beta test site for Teller Capture, Grow Financial FCU began using the technology in its Hyde Park branch in February 2006. As part of the beta testing, CU staff from the finance, operations and IT areas par ticipated in weekly conference calls with Southwest Corporate CU and Bluepoint Solutions. These regular calls took place over a nine-month beta-testing period.

Debbie Hopkins, market manager at the Hyde Park branch where the beta test took place, reports that the transition to the Check 21 system was a smooth and positive one. “Check 21 is a much faster and far easier process (than the previous manual system),” Hopkins says. “It only takes as little as two days to determine whether a check is good, vs. up to 10 days as required by our previous process. From a branch standpoint, it’s been very well received. Our members really like it. They can get copies of their checks quickly instead of having to wait.”

Implementation of the technology in Grow Financial FCU’s other 17 branches occurred in the summer of 2006. With so many branches and computers involved, it was a substantial undertaking, according to James Stock, Grow Financial FCU’s IT support manager.

“Keeping in mind that we were beta testers for the Bluepoint Check 21 process, implementation from the IT side of things required three FTEs and approximate ly two months time total,” Stock reports. “Most of my staff’s time was spent prepping and deploying the 130 new computers that were needed to make the Check 21 project work, as the machines on our teller lines were at the end of their lifecycle.”

The installation of the Teller Capture system occurred primarily during the early morning hours when the branches were closed. Once the installation was complete at a given branch, there would be on-the job training, which typically could be completed in just two or three hours at each location. It was determined that new hires would be acclimated to the Check 21 system as part of their initial training. “We have a train ing room with a mock teller line that includes the Check 21 platform,” reports Karen Allen, AVP/operations.

Now that the system has been operational for well over a year, there is still an ongoing IT commitment to maintaining the equipment. “From an IT perspective, it has added some complexity, and the challenge is dealing with updates that come with enhancements to the sys tem,” Stock acknowledges. “Whenever Southwest Corporate upgrades [generally once a year], we must upgrade at the same time.”

Also as part of the implementation, Grow Financial FCU put in the effort required to educate its staff and membership about what the Check 21 changes would mean for them. “We held staff meetings and showed video presentations of how the check process would become much faster and what substitute checks would look like,” Griffin explains. “We ran articles in our member newsletter and had handouts at the teller line explain ing what substitute checks were, the electronic process and the fact that checks would be clearing a lot faster.”

THE PROCESS

Utilizing Check 21 has added great efficiencies to the branch operations of Grow Financial FCU. It’s a very simple matter of the member presenting the check to the teller, who then scans the check and transmits the check image to the processor. While this might seem to add substantial time to each transaction, the truth is that the time added is negligible.

“One of the concerns we had was how it was going to affect productivity at the teller line,” Sears acknowledges, “but it has not had an adverse effect at all.”

Allen concurs with this. “The amount of time it adds to scan the checks at the teller line is literally just seconds. Where it eliminates time is at the end of the day. There is no need to do batch scanning at that time, since we’ve been doing the scanning during each transaction. It has taken the time required to balance at the end of the day from 15 minutes to five minutes.”

The scanner unit itself is pretty compact, with dimensions of approximately 8 inches by 4 inches by 6 inches. “It’s not big or bulky, so there’s no extra clutter,” Hopkins reports. “It’s a very ergonomical piece of equipment that has helped make us more time efficient.”

Members have adjusted well to the electronic substitution of checks, according to Allen. The credit union already had implemented a practice of providing its members with copies of checks they wrote on their accounts rather than the actual physical items.

“Now, with Check 21, when someone comes in with a check to deposit from a second or third party, when we accept it, we image it,” Weal adds. “There is no physical check. Thus, the concept has expanded from checks they wrote on their checking account to the deposited items as well.”

THE INVESTMENT AND RETURN

Grow Financial FCU invested a total of $857,000 in Teller Capture software and hardware, which includes costs to do substitute check printing, 130 computers, the Primary Payment System (a third-party provider contracted by Southwest Corporate to run the checks through a database to determine the potential of a check being written on a closed or NSF account) and system maintenance. However, this investment was off set by the elimination of the proofing department, con sisting of three proof machines, and redeployment of two FTEs. As part of its cost/benefit analysis, Grow Financial FCU estimated a three-and-a-half-year breakeven point, based on an overnight rate of 5 per cent, but now is on track to break even in two years.

“What we’re essentially gaining back is the float, which amounts to $350,000 to $400,000 when overnight rates are 5 percent or higher,” Griffin reports. “Before we started using Check 21, our process was very manual, which involved substantial personnel costs, courier costs as well as loss of valuable float time. Faster presentment of checks via electronic presentment along with the PPS for early notification of return items has enabled us to place extended holds on check deposits that in the past would have already been released and the funds spent.”

“The holds that we were placing prior to teller cap ture would expire before the checks were returned. Now, we receive most notification of return items before the hold expires,” Wean adds.

The Teller Capture system also has helped Grow Financial FCU substantially reduce the instance of fraud, since the credit union can know right away whether the account a check being deposited will draw on is real, and whether it has sufficient funds.

“Since the implementation of Bluepoint’s Check 21 sys tem, we’ve seen a 50 percent reduction in check-related fraud,” Wean says, amounting to $25,000 a year.

The Check 21 system also offers excellent disaster recovery benefits. “There are no live checks not processed at the end of the day, meaning that if a natural disaster such as a hurricane destroys your branch, there are no checks left un-deposited,” Griffin explains.

Yet another benefit is that the system allows for immediate check research, which can be performed from any area of the CU. “Members no longer have to place a request and wait days for a response,” Griffin reports. “Instead, a copy of the item in question is obtained for them on the spot. Eventually, not only credit unions, but all financial institutions will send electronic transmissions. This will mean shorter check holds for members and much better fraud detection and prevention.”

THE LARGER IMPLICATIONS

As a pioneer, Grow Financial FCU is now a sought-after resource for other CUs that wish to learn more about the subject. “We’ve hosted a dozen credit unions, most of whom have made physical visits to our location and several with whom we had conference calls,” Griffin reports.

While Grow Financial FCU exceeds a billion dollars in assets, Sears reports that a Check 21 solution is accessible to far smaller credit unions. “Because of the pricing mechanism, a smaller credit union would be able to take advantage of the technology on a much smaller scale,” Sears says. “They would need to do their own cost analysis, but from an operational standpoint, I don’t see a barrier. We did our own installation, but a smaller credit union may have to have the providers do the installation for an added fee.”

Undoubtedly, this technology will become more commonplace as the full scope of Check 21′s benefits becomes clearer. At Grow Financial FCU, the decision to be an early adopter of the technology was clearly a correct one.

“I’ll admit that I was a bit apprehensive about trying something so new,” Wean reports. “Whenever you do that, there’s always some concern that it might not work out, but we really had great people working on this project. Everyone worked hard, but I’d give special credit to Debbie Hopkins at our Hyde Park branch, who was such a great cheerleader through the whole process, and James Stock and his IT team, who believed in what we were doing and made it happen.

“There was never one minute when we regretted moving forward,” Wean adds. “It was truly one of the best decisions we’ve ever made.”