An Update From The Clearing House And SVPCO

George was feeling pleased with recent announcements, including a record 105 million check images exchanged over the SVPCO Network in November and U.S. Bank's recent decision to join the network. That decision brings total participants up to 17 - a list which now includes most (but not all!) of the major consumer banks.

With so much going on in the world of check payments (ARC, BOC, remote deposit capture, image clearing, shared archives, etc. ) it's sometimes hard to follow the bouncing ball - much less see what lies ahead. George, as an industry veteran, had some interesting observations:

• The move to image clearing is happening faster than people expected. Although total image clearing volume is still only a small percentage of total check clearing, the growth rates are astounding - and there are exactly parallel drops, of course, in the volume of paper checks cleared. As each major bank starts implementing their model or models for image clearing - and realizing the benefits of faster clearing - it is easy to see an accelerating growth rate over the coming years.
• The image exchange model is working well. I asked about the prospects for "imageless clearing" - where MICR line data is exchanged, along with a locator "address" for the archive where the check image is stored. (This model is working currently at ViewPointe - on a shared archive basis.) George was skeptical about the ability of banks to deal with the practical challenges if the archives are distributed (e.g. "I am presenting this check drawn on you. You can find the image in my archive at .."). George also thought that there were only a limited number of banks that would be willing to house their working archives on a shared common platform.
• Interestingly, this archive-address model is the same one being discussed by the Check ACH coalition, which is evaluating the benefits of converting checks to ACH, with the image locator included in the ACH message. I asked George about the coalition which, as it turned out, was planning a meeting that day. Other than agreeing that the agenda of the group is ambitious, and that "all the right players are at the table", George had little to say - wisely, perhaps, given the myriad potential directions that this initiative could take!
• More practically, BOC, or back office conversion of checks to ACH, is drawing a lot of attention as its implementation date of March 07 nears. Its predecessor format, ARC (used for check to ACH conversion at retail lockboxes) had dramatic growth after introduction, as billers and their lockbox banks were able to make unilateral decisions to implement conversion, with only passive consent required of consumers. NACHA is forecasting even more dramatic growth rates and volumes for BOC. Again, George weighed in with a note of caution, particularly for the merchant, as there is generally not the same kind of continuing, long term relationship with the consumer as exists with the ARC model. Merchants may find that the ACH recourse provisions cause significant problems. (And we note that this may put many POS merchants in the same boat as eCommerce merchants accepting cards - good transactions with a long "tail" of potential problems!)
• George was enthusiastic about prospects for the ongoing growth of B2B electronic payments. Of course, the big story in business payments this year has been the rapid adoption of remote deposit capture, which allows businesses to scan and image-deposit checks received. That is all about making the checking system work more efficiently. But ironically, it may also serve as a catalyst to get these businesses to rethink their own disbursement processes. On the EFT front for businesses, two initiatives sponsored by The Clearinghouse, UPIC (Universal Payment Information Code) and EPN820 (a standardized, simplified EDI format for remittance data) are growing slowly but steadily. In particular, George noted that integration of the EPN820 format into standardized business software packages (for making and receiving payments, and for posting remittance data to A/R systems) is well underway. "It's all about making it easier for small businesses to pay big businesses electronically - or be paid by them".