Image Exchanges Look to Volume Jumps Now That Check 21 Is Law

The fledgling networks that traffic electronic check images rather than paper checks are looking for bigger volumes now that the Check Clearing for the 21st Century Act, popularly known as Check 21, has finally become law. “Now everyone's jumping on the bandwagon,” says Mark Craig, general manager of Endpoint Exchange, Oklahoma City. Many banks were waiting for Check 21 to take effect before acting, Craig says, and now they're seeking out connections to image exchanges. Endpoint Exchange, which Milwaukee-based processor Metavante Corp. acquired this summer, is trading 260,000 images a day, up from 140,000 six months ago, for some 3,500 members that have gone live so far. Craig expects Check 21 to double that volume by year's end. On top of that traffic, he says, are items destined to be image replacement documents?paper printouts of images that, because of Check 21, must be accepted by paying banks as the legal equivalent of paper checks. Currently the exchange is handling just over 2,000 IRDs per day, but Craig expects that number to climb to 250,000 by the end of the year. Endpoint Exchange was the only national image exchange in operation until August, when a network built by New York-based Small Value Payments Co. (SVPCo.) went live, trading images between Key Bank and J.P. Morgan Chase & Co. An SVPCo. spokeswoman says the exchange so far is still limited to a “small number of images” between these two institutions, which are testing back-office operations. “It seems to be working really well,” she says. The company won't project year-end volume, nor will it reveal a schedule for bringing institutions live on the network, but the spokeswoman says it looks to 2005 as the year it commercializes its service. SVPCo. serves 19 owner-member institutions, which together control more than 60% of all commercial-bank deposits in the U.S. Check 21, which took effect last week (Digital Transactions News, Oct. 28), confers on so-called substitute checks the same legal status as the checks themselves. Although the law doesn't address image exchange, the swapping of substitute checks, known in banking circles as IRDs, is expected to encourage the growth of these networks since IRDs are derived from images. Also, IRDs are widely seen as a short-term bridge to full-scale image exchange for banks that aren't yet prepared to receive images.