Check Scanning Lives On The Edge

Even as businesses are relying more and more on document imaging, there are still some hurdles on the path to eliminating paper from some types of transactions. Perhaps the most contested item in the "to scan or not to scan" arena is the personal or corporate check. While companies and their customers may willingly accept, for example, the digital image of an invoice, they may not be entirely comfortable losing their grip (literally) on a payment check.

But, that reality is already showing signs of evolving into something else - a world so infused with electronically routed financial transactions that, even at the consumer level, acceptance will be widespread. Growing adoption rates for check scanning technologies at small to midsized community banks are one clear sign of the transformation. "Community banks are seeing their consumers becoming increasingly comfortable with digitally-based financial activities such as paying bills online and viewing images of checks," says David Youngerman, president of check scanning vendor Panini North America (Dayton, OH). "And, corporate clients at large, national banks, as well as community banks, don't want to handle paper anymore. They often prefer to receive CDs of their check images rather than paper."

Truncation - A Key To Adoption
Another driver - potentially the key driver - for widespread rollouts of check scanning technologies would be the passing of the various check truncation bills currently under congressional review. (They are often generically referred to as "CTA" [Check Truncation Act] or "Check 21," a shorthand version of the bill entitled "Check Clearing for the 21st Century Act.") The check truncation bills are designed primarily to standardize the exchange of electronic information among banks, as well as between the Federal Reserve and various check-processing entities. Check truncation as identified in the bills refers to the point in the life of a paper check at which it is turned into a digital image. According to the check truncation proposals, after a check has been truncated, the paper version would no longer need to be routed. Instead, the digital image would become a legal substitute that can be processed, exchanged, and archived as if it were the original paper document.

Check truncation put into law would likely inject urgency into the current trend toward decentralized check scanning. Already, many banks - even community banks - are anticipating the change and installing check scanning systems in their branch locations. If check truncation were to commonly reach the edges of the banking environment, the volume of purchased systems would rise significantly, potentially driving the cost of such systems down. In that scenario, check scanning systems would likely proliferate well beyond the banking industry - making their way into even more retail environments and, perhaps, into the accounting and payment processing activities at companies in other industries. Says Pam Wilson, worldwide director of software product management at document imaging provider Eastman Kodak (Rochester, NY), "Organizations are attracted to truncation technologies because they realize it's much cheaper to handle a digital file that contains hundreds of transactions to be processed rather than handling each individual paper item."

Heiko Oberman, president/CEO of check scanning manufacturer Seac Banche USA, Inc. (Atlanta), cautions that users of check scanning systems will see real cost benefits only when there is widespread buy-in from consumers. "The cost of payment transactions can definitely be lowered by using imaging technologies," says Oberman. "But, volume is necessary. So, organizations will need to fully commit to going in the truncation direction. But, at the same time, they must be careful not to irritate their customers and consumers, who may be only slowly getting comfortable with moving away from using hard copy checks."

Scanning Accuracy - When 100% Really Matters
With or without standardized truncation policies, today's check scanning systems are powerful enough to make their own case for the business benefits of imaging. In addition to incorporating high-resolution digital imaging technologies, they offer sophisticated OCR (optical character recognition), OMR (optical mark recognition), and ICR (intelligent character recognition) functionality, making them capable of handling text, signatures, marks, and numbers.

According to Wilson, a fundamental benefit of imaging is the ability to have immediate access to recently collected items. "Because digital check scanning accurately reads all of the account information on the bottom of the check, the system speeds the retrieval of items needed for researching customer account issues or gathering information for legal investigations, such as cases of suspected fraud." Outside of banking environments, check scanning systems integrated with the company's back end accounting programs enables payment information gathered from checks to be uploaded to AR/AP (accounts receivable/accounts payable) departments.

Still, even with the already high performance levels of check scanning systems, they may not yet be able to support the 100% adoption of standardized truncation that Oberman says will be necessary. According to Youngerman, scanning accuracy rates can't simply be phenomenally high: they have to represent something close to perfection, if not absolute perfection. "In check scanning products currently on the market, the algorithms that read the MICR [magnetic ink character recognition] numbers are tuned to drive misreads nearly down to zero. Accuracy rates are generally in the range of 1 misread for every 20,000 checks scanned to 1 in 30,000," Youngerman says. "Those numbers will have to go - and they will go - a lot higher."