Back Office to the Future: Check 21 and Back Office Conversion
 

With the commencement of the Check Clearing for the 21st Century Act (Check 21) on October 28 of this year, check processing has never had as much attention as it does today. Institutions are trying to determine what Check 21 means to them and how they can take full advantage of the technical advances within the industry. The basic premise for Check 21 is that a printed image of a check (compliant with the ANSI standards X9.100-140) carries the same legal weight as the original item. This law creates a new negotiable paper item — substitute check. While check 21 does not require financial institutions to exchange and settle on images, it is a necessary step in the facilitation of future image exchange possibilities. It is not realistic to think an entire paper based check clearing network can convert to an image based check clearing network overnight. The creation of a substitute check enables various parties in the settlement network to move between an imaged based settlement method and a paper based settlement method. Institutions can move forward with image exchange while still being able to go back to a substitute check when the former is not feasible. As outlined above, the reality of Check 21 does not mean that on October 28 the settlement network will move from paper based check clearing to image based. This transformation is going to take time. There are many different theories as to how many checks will be exchanged and settled via image over the next one to three years. Solutran is developing and introducing new products designed to help our clients take full advantage of the opportunities presented by Check 21.

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Check 21 will impact all companies in a variety of ways. A hot topic of discussion today is back office conversion, or remote capture. This is a new process that enables the corporate client to collect images of depository items across multiple locations and transmit those images to a central processor and/or bank. Those items may be rendered into substitute checks and physically deposited or exchanged as images and settled electronically. This results in consolidated depository relationships, which increases efficiency and can potentially lower processing expenses. At the end of the day, there are unique opportunities and challenges created by Check 21 and you will need to evaluate whether or not these make sense for your organization. Solutran is always ready to help you navigate these options. As the saying goes, 'technology enables, but economics drive'.

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