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Friday March 26, 04:54
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Banks Now Consolidating Checking Infrastructure
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Declining check volumes resulting from the Check 21 Act and the rise in e-payments are prompting US banks to reassess their transaction-processing strategy and to shut down redundant infrastructure. Wells Fargo, for one, is “painfully ratcheting down excess capacity in the check environment”, says EVP, Mitch Christensen, in recognition that the industry has had to make significant write-downs in this area. In other news, the Western Payments Alliance (WesPay) has sold its checking services to The Clearing House (New York), which expects financial entities to rely on services like its own as infrastructure consolidates.
Ultimately, The Clearing House aims to create a single payment infrastructure and standardized rules for financial entities shifting their check-processing operations to clearing houses or larger banks. Celent analyst, Gwenn Bezard, confirms that the formation of check image exchanges is the logical next step, as banks gauge how their solutions will interoperate. On the basis that paper check volume is falling at about 3 per cent a year, research firm, TowerGroup, is advising banks to outsource some, or all, of their check-processing functions, now that check electronification significantly impacting banks’ overall check volume.
By TowerGroup’s estimates, the use of check images will increase check processing capacity by 20 to 30 per cent, which will result in a check processing overcapacity of about 50 per cent in the next five years. Since the shift to e-check presentment will occur over several years, banks are expected to rely on paper checks, printed substitute documents and digital files. The extra cost of in-house processing strengthens the case for banks to outsource their check processing, but Tower Group also warns that check functions such as wholesale lockbox services are best
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