Tiny LendingTools.com Has Big Ambitions for National Image Exchange

A small Wichita, Kan.-based software company is getting set to take a big step in bringing image exchange to small financial institutions around the country. Starting with the north central region of the U.S., LendingTools.com Inc., a provider of Web-based systems for image processing and origination of automated clearing house debits, plans to create a series of what it calls “on-we” regional exchanges for imaged item processing. “Check 21 is our big new initiative,” says Eric Goering, the former banker who runs LendingTools.com as chief executive. (Check 21 refers to the Check Clearing for the 21st Century Act, the 2004 law that allows banks to settle on printouts of check images rather than the original checks. This law gave a boost to the concept of image exchange, or the trafficking of electronic check images for clearing and settlement). The company, which targets community banks through the correspondent banks that serve them, plans to center each regional on-we exchange on the one or two so-called bankers' banks that operate in those geographic areas. By aggregating check images at the bankers' bank level for submission to image-exchange networks, the company argues, small banks should enjoy economies of scale in negotiating pricing for image exchange that they could not gain on their own. “We keep the fees small,” says Goering. “We want hundreds [of banks] to adopt.” The first such exchange is in pilot with the Bankers' Bank of Minnesota, which serves 400 institutions in Minnesota, North Dakota, South Dakota, Nebraska, Iowa, and Montana. Altogether, LendingTools.com, with a head count of 16 people, claims 60 clients, which in turn serve some 2,000 small banks, or approximately 20% of U.S. banks. The client base, Goering says, has doubled in the past year. Each of these community banks, he estimates, in turn claims from five to 10 merchants or other business clients. To extend the on-we exchanges to these corporate endpoints, LendingTools.com in April licensed remote-capture software from VECTORsgi, a unit of Metavante Corp. On the ACH side, its software handles 5% of all volume today, Goering says, twice the level of a year ago. This number could go to a 10% share within a year, he figures. But for now, he's limiting the on-we exchange concept to check images. “We're starting with Check 21,” he says. “We're going to see how it goes.” What he calls “cursory talks” have already started, he says, with Endpoint Exchange, the first national image exchange to go live in the U.S., about ultimately linking these on-we exchanges with that network, which also serves community banks and credit unions. Endpoint Exchange is also owned by Metavante.