Every day there are over 2 million cheques processed within the UK and whilst this number is declining gradually, the simple fact is that some organisations and people prefer them as a payment tool. There is however no doubt that the current way of handling cheques is cumbersome to say the least and that there are many opportunities to gain further efficiencies.
In countries such as the US, Brazil and India the use of technology to facilitate ‘electronic’ or image based cheque clearing is increasingly well established and this has resulted in reduced costs and faster transfer of funds. Although clearing cycles differ from country to country the model involves capturing images of the cheques, both front and back, and digitising the code lines and relevant personalised and variable data.
The UK is sadly trailing behind, using a model that has not changed for decades and still requires the physical transfer of the cheque throughout the clearing system. However there is a gathering momentum for change, partly as a result of the Payments Council’s U-turn on the proposed closure of the centralised cheque clearings, originally slated for 2018.
The encouraging news is that the UK should benefit from years of learning, and some mistakes, that other countries have experienced in the implementation of image based clearing (the US ‘Check-21’ truncation is a good example), and the technology is now not only better, but also becoming cheaper. The key to the processing benefits on offer is ‘collaboration’, and this will be a challenge in a UK banking sector where legacy systems, risk aversion and a cautious approach to operational change is the starting point for such an initiative.
Building Societies, whose typical customer is familiar with cheques and is unlikely to let go easily, can gain real operational advantages from branch capture of cheque images, and a number of examples exist today, including Cheshire, Hinckley & Rugby, and Ecology Building Societies. To be ‘Image-Ready’, before truncation becomes a reality, can deliver immediate benefits to reconciliation, customer service, banking processing and AML record keeping.
Perhaps the finance sector can also take heart from the experience of some of our corporate clients? At The TALL Group we have developed a bespoke software application in anticipation of industry changes. Our “Checkprint Banking Assistant’ product follows the same principles of image capture in operation in the US and other countries and is currently being used by over 200 of our customers in-house. It is proving extremely useful for query resolution, record keeping and local or networked reconciliation to ledger systems.
This means that the technology is already available and up and running in the UK and there is enough market intelligence to make image based processing happen sooner rather than later. With a new regulatory regime likely to impact the payments sector in the near term, (carrying a mandate to continuously improve UK payments systems) a ‘version’ of the international models will very likely be put in place.
By Martin Ruda, Managing Director of The TALL Group of Companies.