A Viewpointe Whitepaper ® Eight Steps to Image Exchange As check electronification progresses, image exchange capability is becoming a business imperative for financial institutions of all sizes to remain competitive. It is evident that this is the direction in which the industry is moving. (For a look at the inroads being made in the industry by check electronification and exchange, visit www.viewpointe.com/files/ImageExchangelnroads.pdf.) The faster financial institutions can get involved in check electronification and check image exchange, the sooner they can: • Eliminate the high costs of maintaining a manual infrastructure for paper processing. • Provide more value to customers through innovative new products and services enabled by check electronification and exchange. A Simpler, Faster Process For those financial institutions that have not yet started image exchange, there’s no time like the present to get involved. The check image exchange process has become simpler, faster and more consistent across the industry since the Check Clearing for the Twenty-First Century Act (Check 21) went into effect in October 2004. Organizations that got involved in the early days — vendors, channels and financial institutions — climbed a steep learning curve as they transitioned from a paper to an electronic environment. Now, their experience has paid off. Defined processes for implementation are now in place and potential stumbling blocks — and how to avoid or overcome them — have been identified. Image technologies continue to evolve and improve, helping smooth and shorten the image exchange process for institutions of all sizes. The industry is steadily marching toward the goals of interoperability and standardization of file formats, coding and messaging. What’s more, vendors’ products have matured and generally can be customized without compromising their interoperability. Today, image-enabled financial institutions with a universal file transmittal system in place generally can get image exchange up and running in as little as 90 days. After that, adding another partner or connecting to a network may take only four weeks. This whitepaper puts forward an eight-step process that can help guide financial institutions of all sizes through a timely and smooth implementation of check image exchange. The Eight Steps of Implementation The path to image exchange can be broken down into just eight basic steps. These steps are designed as a guide; each financial institution will have to customize the process according to its own specific objectives. Step 1 Develop an image strategy. Because the decision on whether or not to proceed with image exchange can have far-reaching implications on a financial institution’s competitive positioning, the business case that’s developed must go beyond technological considerations. The impact on the organization as a whole — and how image exchange aligns with corporate strategy — must be considered. An effective business case should answer questions such as: What are our business objectives for image exchange?; How will image exchange support our corporate objectives?; How will image exchange save costs?; What revenue-generating opportunities will it provide?; and How will our business be affected if we choose not to implement image exchange now? Step 2 Image-enable check-processing operations. For most financial institutions that are considering image exchange, this step is a fait accompli. Any institutions that have not yet become image-enabled must first decide if they are going to do image capture in-house or outsource that function to a third-party service provider. Financial institutions that decide to do image capture in-house must first install up-to-date cameras on their capture equipment. Using those cameras to image checks, their processing system must then be able to create a file with MICR information and other needed data in the standard X9.37 file format for transmission. Financial institutions should keep in mind that, while the ideal scenario is to image-enable Day 2 processes, Day 2 enablement is not mandatory for exchanging images. The financial institution implementing image exchange must be committed to eventually taking the paper out of its check process. With this goal in mind, the institution must plan when and how each aspect of the check process — from capture through returns, exceptions, and adjustments — will be image-enabled. It’s important to keep in mind that this does not have to be done all at once. For instance, depending on available resources, a financial institution may first image-enable its send volume and later phase in receipt volume. The ultimate goal, however, is to ready for image exchange any area that touches the check, including: • Image capture and cash letter • Data communications • Image archive • Posting data send and receive • Reconciliation • Image cash letter send and receive • Image reject re-entry • Image quality • Image exchange balancing • Transit bulk file • Exception processing • Outgoing and incoming returns • Image research and adjustments • Image settlement • Image statements It is important, too, to decide which routing transit numbers will be image-enabled. Some banks start small by image-enabling just a few RTs. Step 3 Create a cross-functional project team. The financial institution should choose a project manager who knows the image exchange process and technology — in short, a subject-matter expert on image exchange — and then pull together a crossfunctional team. The team should include the institution’s operations manager for the item-processing function, an expert in connectivity and someone with the technological expertise to configure the vendor software. The same team should work on future implementations with other exchange partners to ensure an efficient process, although the team can be streamlined as its members become better versed in the various functional areas involved in implementation. Subsequent implementations, therefore, will require less investment in human resources than the initial implementation does. Step 4 Make any necessary workflow changes to accommodate image exchange. Such steps might include adding duplicate detection for image replacement documents (IRDs) and images, implementing image statements, and enhancing your fraud detection systems to review images with fraud filters. Step 5 Choose a channel that allows the institution to exchange with a full range of partners through a single connection. Implementing a single, robust connection is easier than managing multiple, individual connections to banks and/or other service providers. Networks such as those operated by Viewpointe, the Federal Reserve, SVPCo, and Endpoint Exchange provide one-to-many connections quickly and efficiently so that financial institutions can exchange images with financial institutions of all sizes and locations. Checks Collecting (Sending) Financial Institution Paying (Receiving) Financial Institutions and Industry Connections Checks Imaged and Truncated Image Exchange Channel The financial institution should make sure the channel/channels it selects provides: • A dedicated implementation team with a project manager serving as its single point of contact. • An established set of customer-approved business guidelines and operational practices. • A proven implementation process and detailed implementation documentation. • Quick, smooth access to primary, back-up and testing sites. • A documented testing method that is clearly communicated and strictly followed. • A proven track record — with the experience and best practices needed to get the financial institution connected and actively exchanging images as quickly as possible. Many financial institutions already have a plug-in, universal application for image transmittal from multiple capture sites to a main processing site. Financial institutions with such a solution can most likely use it for image exchange. In such cases, image exchange implementation generally can be completed in as little as four to six weeks. Step 6 Outline key processing procedures with exchange partner(s). Partner banks must work out rules and procedures for all aspects of the check process. Potential trading partners should therefore answer questions such as: • Where will electronic check presentment (ECP) and the ECPi data and image file be received? • What types of data transmission does the bank support? • What does the institution need to receive — ECP/ECPi, or ECPi only? • On what days will we share/exchange images? • What are your current sending times with your current exchange partners? Do you expect to keep the same send time with your new partner? • Volume expectations: How many items does your institution expect to send to your partner? • How will items that have been returned to the institution by your partner be handled? (For instance, will they be recaptured and sent to the partner? Will the original item be forwarded in a paper cash letter? Will you send IRDs?) • How will suspect items be handled? Other questions might deal with file size, data fields, routing transit numbers, administrative contacts, testing details, etc. Getting answers to these questions before implementation begins will help to smooth the process and prevent any unpleasant surprises. Step 7 Prepare and train staff. Financial institutions implementing image exchange should explain why the change is being made and assure personnel that the work will be different but not harder. Above all, staff should be trained in the simplest ways possible to handle the new workflow and associated tasks. Even if an institution has a strategic plan for image exchange in place, that plan can get compromised if those who are actually administering image capture and exchange are not trained and continually brought up to speed on the equipment and processes. Step 8 Test everything with partners and vendors. Before testing, financial institutions should identify the parameters that will be used to determine whether a test is successful. A financial institution might have a scheduled test cycle in which it sends on one day, receives on another and reviews during the days in between. Other institutions might find it sufficient to simply send a file and have the receiver verify it. Some experts recommend sending a minimum of two good cycles — two separate files at two separate times — with complete send-andreceive at both ends. Viewpointe®, based in New York, with offices in Charlotte, NC, and Parsippany, NJ, is a leading provider of check image and Check 21related services. For more information, visit www. viewpointe.com or email firstname.lastname@example.org. It is generally advisable for financial institutions to share test decks with their partners, capture images on all capture transports and test the entire process. Testing should confirm that the items can pass through the Federal Reserve as well. The duration of testing depends on the institution’s testing requirements. An average testing period might last 14-16 days. At the end of the testing period, the two partners should meet to address and resolve any issues, or simply to agree to go forward with the implementation. Image exchange must again be tested — and partners notified — whenever a financial institution makes in-house changes that may affect the image exchange process. This includes, for instance, changes in software or workflow policies and procedures. Ongoing communication among all stakeholders is always essential. And Now… …The financial institution is ready to exchange! By following these eight steps, financial institutions generally can implement image exchange smoothly and systematically in as little as 90 days. New partners can be added in just a month in many cases. A bank that is already exchanging generally can connect to a network channel such as Viewpointe in as little as six to eight weeks. No Time Like the Present Given the advancements made in implementation processes, there is no time like the present for financial institutions of all sizes to get into the game. With the industry’s rapid adoption of image exchange, those financial institutions that don’t get involved risk being left behind. The sooner financial institutions make the decision to engage in image exchange, the sooner they can reap the many benefits afforded by their new capabilities.