Thursday, October 4, 2012

Deconstructed Check Processing?

I just got back from an excellent Remote Deposit Capture Summit organized by It is fast shaping up to be the place to gain knowledge and network with key players in the check processing industry. Not so long ago, there were several events a year devoted to, or with a major emphasis on check processing. Most have fallen by the wayside- perhaps driven by the assumption that check processing is mature and uninteresting. That this was from true was attested to by many at the Summit who presented business and consumer adoption figures showing a vast, yet untapped market.

Whether adoption has been glacial or spectacular depends on perspective. Celent’s Bob Meara had done a study a while back showing that check imaging has had a faster uptake than most other technology introductions in the banking space. Yet, the impatience to drive distributed capture into every office, shop and home is understandable. There was continued debate at the Summit between risk perception and the need to drive customer convenience. It is my take that while the risk folks ruled the roost in the early years, the convenience advocates are beginning to scale the ramparts. 

Yes, mobile RDC is cool and growing, check scanners are growing smaller and more accurate, but what caught my eye at the Summit is a possible shift in industry tectonics. Remember the early days of distributed capture? The focus was on branch back counter and teller capture back then. The technology players in the marketplace were those that had a pedigree in traditional check processing- the people who could make documents fly down the track on a 3890 high speed sorter. You had to earn spurs in centralized, sorter-based processing to get a seat at the distributed capture table. 

The push to capture checks from outside a financial institution’s infrastructure through merchant capture, and the slow evolution of the X9 and image quality standards began the tear away from the “sorter-on-a-rope” paradigm, as an industry wag uncharitably put it. New players entered the field, and some leading names disappeared from the industry. Fast forward (yes, an obsolete term in the MP3 era) to 2012, and we have technology suppliers specializing in particular channels of capture. Clearing and settlement? Oh well, that’s something that someone does with the X9 file we give them. Now, toss in the down-loadable app, and we are perhaps set for more deconstruction of the check processing chain.

I am tempted to draw a parallel with the evolution of card processing. During the paper draft days, there were “paper factories” processing card transactions. Electronic Draft Capture (EDC), and the introduction of specialized terminals by Verifone , Hypercom and others changed the nature of the industry. Today, there are those that specialize in the acquiring front end and others who drive scale through the switch. Substitute the words “capture” for “acquire” and “clear” for “switch” and you may have a template for where check processing may go.

I know past is not always prologue, and checks are very different from cards. Draw the picture out nevertheless and contemplate the shape of the check processing industry in five years. Fascinating, right?