How A Bank Uses The Internet To End The Paper Chase

Piles of paperwork are a given for a bank's "wholesale lockbox" business, due to thousands of processed corporate checks and invoices. After picking up the mail several times a day, the bank processes a customer's checks and supplemental documents such as invoices and remittance slips. The funds are then deposited immediately into the customer's account. The other information is organized and forwarded to the customer for accounting purposes. Experienced in the wholesale lockbox business, NationsBank sought to reduce those piles of paperwork and to provide faster service to its customers.

Bank Studies Situation, Seeks New System
NationsBank held an 11%-12% share of the wholesale lockbox market and was the nation's largest wholesale lockbox processor when it was acquired by BankAmerica Corporation for $43 billion on Sept. 30, 1998. Under the new name, Bank of America (Charlotte, NC), the institution ranks as the largest U.S. bank, with $618 billion in assets. Bank of America, a 180,000-employee operation, handles an estimated 18% of all corporate checks deposited in the United States.

That's a lot of paperwork - especially under NationsBank's old wholesale lockbox system, said Royce James. Formerly the senior v.p. and project leader for NationsBank, James is now the senior v.p. and lockbox project manager at Bank of America.

"In the 'old world,' we would open the envelopes, batch the checks and invoices, and send the checks through a scanner," James said. "The checks were encoded, sent through the check-clearing process and deposited to the customer. We were very good at that, as good as anybody in the business. But the trick is how can we capture the check's image and make the customer funds available as soon as possible, plus digitize the invoice and deliver that information just a couple hours after we process it?"

James said that second step - returning the information to the customer - was the costliest and most cumbersome task. In the past, invoices and remittance slips were all handled manually. Photocopies of the original checks were made and matched with the original invoices. All of this documentation was then mailed back to the customer.

James said that after a study from 1993-95, NationsBank concluded that an all-inclusive data-capturing system would be best. The check, invoice, remittance slip, envelope and any other additional information would be scanned and delivered to the customers via the Internet. "That would get the information back to them 24 hours faster than before," James said. "The fact that we wouldn't have to handle that paper and ship it in packages back to the customer was really pushing our decision to make the investment that we did. It benefited us operationally and benefited our customers."

Advantages Include Speed, Color
NationsBank eliminated its previous system, which included a Tartan processing unit, BancTec check encoder and REI check scanner. That system processed 200-300 documents per hour and produced a plethora of paperwork. In 1994, NationsBank experimented with a prototype system that electronically captured both checks and supplemental documents. But the system kept the checks and invoices together at the front end of the process and created an information bottleneck.

The hub of NationsBank's new system was the ImageTrac from Imaging Business Machines, LLC (IBML). The ImageTrac scans up to 4,000 documents per hour in color at 100-200 dpi and requires no presorting. Additional equipment includes a voice recognition system, bar-code readers, desktop check scanners and custom scanning software from Vicor. A client/server platform stores the information onto RAID disks. Plus, instead of waiting for the next day's mail, Bank of America customers can now log onto the Internet to see color images of both checks and remittance documents. Hard copies are sent only at customers' requests.

"Invoice documents aren't standard at all," James said. "They can range from a clear, well-formatted stub to literally a piece of scrap paper in different color ink. Because those documents are captured in color, our customers can distinguish the images and find information faster. The items can be enlarged and reduced on the screen for better reading."

James said that while these color images require more computer storage space, falling prices of memory have kept down Bank of America's costs. The only drawback color images present is a longer time to download that information, sometimes up to 45 seconds on a 28.8 kb modem.

"Not The End Game"
Bank of America's new wholesale lockbox system has been operating for less than one year in its Atlanta center and was recently installed in its Dallas and St. Louis facilities. Plans call for the system to be operational in Chicago, Los Angeles and San Francisco by the end of 1999. James said that Bank of America has not placed a priority on adding to its list of wholesale lockbox customers. Instead, it is focusing on converting its large base of customers to the new system.

Enhancements requested by Bank of America customers are being noted and should be added to the system by mid-2000. Among them will be notification via e-mail if a delinquent client makes a payment, in order to release credit or ship goods to that client faster. James noted that the current system is "not the end game."

"We built this system so as different requests come from customers we can respond to them," he said. "The enhancement list keeps growing. We're not finished getting all the volume on it yet." But Bank of America and its customers are finished handling all that extra paperwork.