Banks Lining Up to Take Advantage of Electronic Payment Solutions

As new payment technologies emerge, every financial institution is faced with the question of how quickly to make the necessary investments to adopt them. With the early adopters taking the brunt of any bumps in the road, the temptation to maintain a wait-and-see approach is compelling. But there is an inherent risk in waiting too long to take advantage of the efficiencies afforded by innovations such as remote capture and image exchange. Customer loyalty notwithstanding, the consumers and businesses you serve will wait only so long for you to provide them with the conveniences and cost savings your competitors will surely be offering.

Three clients of Fidelity National Information Services (FIS) are managing the delicate balance between boldness and caution in rolling out electronic services that promise to help them optimize efficiencies, mitigate risks, maximize revenues and fortify customer relationships.

At the Front of the Line for Branch Capture

Never let it be said that Uwharrie Capital Corporation is faint of heart when it comes to technology. To the contrary, this $350 million multi-bank holding company has a culture of embracing cutting-edge innovations, boldly moving forward when it’s clear that a new solution will bring greater efficiency and allow them to better serve customers. That’s why its three North Carolina banks—Bank of Stanly, Anson Bank & Trust, and Cabarrus Bank & Trust—were among the first in the country to begin reaping the benefits of capturing check images at the teller line.

In late 2004, Fidelity National Information Services (FIS) was ready to go with Branch Capture Xpress™, a solution that allows banks to capture check images in the branch, eliminating the costly transporting of paper checks. FIS needed a beta bank and turned to Uwharrie Capital, which had been using FIS’ BancPac™ core processing solution since 2002. The holding company’s IT and operations teams quickly agreed.

“We had several goals in mind,” said Jackie Jernigan, Executive Vice President. “We wanted to eliminate the $4,000 per month we were spending in courier fees, and the idea of extending our business day was attractive. But we saw other advantages. For example, we wanted the freedom to open new branches wherever we see opportunity, without the restrictions you have when driving paper from point A to point B. Our long-range goal was to begin positioning ourselves for all the benefits of complete image exchange.”

FIS and Uwharrie Capital moved through the implementation in just four months and encountered minimal challenges, and soon the banks were electronically transmitting their checks and other items to FIS’ processing center in Greensboro, NC where the cash letter is created and sent to the Federal Reserve. At that point, the banks cancelled their courier services and so far, Jernigan estimates they have saved at least $65,000.

As for their other goals, all eight branches that comprise the three banks extended their business days to 5 p.m., which allows them to more quickly make use of deposits. Likewise, their customers benefit because they do not have to interrupt their business day to get to the bank by a certain time, and they eliminate the built-in costs associated with sending their employees to the branch.

Uwharrie has not yet realized its goal of branching outside their traditional geographic area because branching has been a lower priority while they focus on other goals. However, they are continuing on their journey toward image exchange, with their next step to implement Commercial Capture Xpress™. This solution, also from FIS, will enable the company to equip their commercial banking clients with the software and scanners needed to capture and transmit check images at their own places of business—an arrangement that holds huge benefits for both the bank and the merchants.

“Branch Capture Xpress delivered another benefit that wasn’t on our radar screen when we began this,” said Jernigan. “When we were still couriering checks, like most banks, we did not microfilm them before they left our branches. If something had happened and those documents were lost or destroyed, the time and money involved in recreating them would have been overwhelming—not to mention the potential loss of customer goodwill. That risk once seemed minimal; but when you consider recent natural disasters and the threat of terrorism in the back of everyone’s minds, it makes you stop and think. Now we always have an electronic image of every check that comes through our banks.”

At the Front of the Line for Merchant Capture
When the organizers of Nashville Bank & Trust began defining the type of bank they wanted to be, they knew they wouldn’t try to be all things to all people. With 40 banks in their market area, they recognized the need to find not only a niche, but a competitive advantage.

“We set our sights on private banking,” said Tom Stumb, President for the bank. “We reasoned that by concentrating on trust services and wealth management, we could set ourselves apart while insulating ourselves from unexpected economic downturns that can create serious problems for de novo banks from a credit quality standpoint. We also reasoned that if we were smart about adopting the right technologies, we could avoid the overhead associated with building branches for the purpose of attracting deposits. We opened for business in August 2004, and two years into it, it’s working well.”

When selecting their core processing system, the bankers conducted a thorough analysis and opted for FIS’ BancPac™ because of its Windows® platform; the fact that it would be easy to install, maintain and use; and it met their objective of working seamlessly with other applications they need to operate their bank.

But the best was yet to come.

Nashville Bank & Trust served as a beta site for FIS’s new Commercial Capture Xpress™, a solution that transfers the processing of checks from the bank’s teller window to the client’s place of business. Each customer location is equipped with a check reader and related web application that allows them to scan and read their own checks and automatically transmit them to the bank. The bank currently has over 30 clients—doctors, lawyers, property management companies and family owned businesses—installed with scanners.

“Commercial Capture Xpress is helping us minimize costs related to picking up clients’ deposits via courier,” said Stumb. “With the average pickup at $15 or so, multiply that by 20 pickups a month and you save $300 a month—just for one client. We’re saving tens of thousands of dollars a year, and we’re just getting started.”

The bank finds that Commercial Capture Xpress is a great selling tool that helps them attract new clientele—in fact about 80 percent of prospective customers are interested in the service. They like the idea that they don’t have to rush to the bank every day by a certain time, there are fewer errors because keystrokes are virtually eliminated, and photocopying of checks is no longer necessary.

Of greatest interest is the fact that checks clear the same day they are deposited, so business owners have the use of their money faster. They also earn immediate earnings credits, so they have more funds working for them sooner.

Because the merits of merchant capture are becoming more widely recognized in the marketplace, business owners are asking for it with increasing frequency. As a result, a crop of vendors have materialized that are selling the scanners directly to banks and merchants alike, making a profit on the equipment as well as on per-check charges.

Business clients of Nashville Bank & Trust typically incur no hard dollar charges for the remote deposit service, as their average balances offset the expense associated with its delivery and use. “We view this service as our ‘teller window’ to our business clients,” said Stumb. “They especially like it when it doesn’t cost them anything extra to get it installed or to use it going forward.

“Our message to prospective clients is simple,” he continued. “With remote deposit capabilities from Nashville Bank & Trust, they can put their cash to work faster while saving time, money and human resources. It’s a selling proposition that’s hard to resist.”

At the Front of the Line for Image Exchange
While some financial institutions are tempted to adopt technology just for the sake of technology, Provident Bank takes a calculated, pragmatic approach. With $6.4 billion in assets and more than 150 branches in Maryland, Virginia, District of Columbia and southern Pennsylvania, the 120-year-old bank is a diversified institution serving a mix of retail and commercial customers.

In 2001, Provident became the largest institution to outsource their item processing to FIS’ Woodlawn (Baltimore) data center, and later expanded to the Sterling VA center. Over the past several years, they have added imaged statement printing and, most recently, remittance (lockbox) processing to the list of services they take advantage of.
An important benefit has been the bank’s ability to significantly raise the bar when it comes to customer service. Before opting for the imaging of checks, a customer who needed to retrieve a check had to come to the branch and fill out an affidavit that was then mailed to the operational center. The check would be manually retrieved and mailed back to the branch where the customer would have to come back and pick it up. Thanks to the electronic archive, customers are now instantly served through either the branch directly, or through a number of Internet self-services capabilities.

As Check 21 legislation became imminent and was ultimately signed into law, Fitzhugh was continually watching the trends and monitoring the options.

“We foresaw that dramatic changes were coming and that check volume was beginning to drop,” said Jay G. Fitzhugh, Provident Bank’s Senior Vice President, Strategic Directions. “Our own debit card program was very successful, with customers enthusiastically embracing this convenient alternative to check writing. And the trend in the industry was clearly to move more and more checks electronically. Observing this, we wanted to begin making the right decisions at the right time so that we could maximize our clearing ability for the checks we still were receiving and maintain a competitive cost structure for items processing in a dynamic environment.”

In 2005, FIS entered into a strategic alliance with JPMorgan Chase, one of the leading check volume processors in the country. The bank holds the number one position in U.S. dollar clearing and most recently was ranked as the number one originator of ACH payments. A key component of this alliance is Fidelity Payment Xchange™, an end-to-end solution for image and paper cash letter receipt and presentment that enables financial institutions to exchange items with other institutions and participate in leading national exchanges. The alliance combines the strength of FIS’ nationwide network of 50+ transaction centers, a national archive and distributed capture solutions with JPMorgan Chase’s extensive expertise in payment clearing and settlement.
Through a careful analysis by Fitzhugh and other Provident Bank leaders, it was determined that participation in the network could continue to increase forward presentment funds availability. Early this year, the conversion took place, and the bank began exchanging images via Fidelity Payment Xchange.

“We’re moving slowly, taking this in small steps, but the early learning process has been enlightening and the results to date, rewarding,” said Fitzhugh. “Through a combination of Check 21 image exchange strategies, including payment exchange, we have increased our forward presentment availability from 87 percent to 95 percent next day. We have gained eight percent increased availability that is available next day for investment. This is a very positive result for us, and we believe we can make that grow through expansion of the Fidelity Payment Xchange.”

Fidelity National Information Services one of the world’s largest financial institution technology processing and services companies in the world. Its Integrated Financial Solutions division provides core processing, check imaging, eBanking, card services and business intelligence solutions that empower institutions to optimize efficiencies, mitigate risks, maximize revenues and fortify their relationships. For more information, contact FIS at 877-482-8786 or ifs.info@fnf.com, or visit www.fidelityifs.com.