How Endpoint Exchange Is Riding the Rising Image-Exchange Wave

At a time when image exchanges are reporting dramatic jumps in volume but are struggling to get members to receive as well as send check images, Endpoint Exchange in Oklahoma City is reporting double-digit monthly growth rates as well as a base of 3,000 receiving financial institutions. “The name of the game in image exchange has been to receive,” says Jeffrey W. Vetterick, general manager of Endpoint Exchange, a unit of Milwaukee-based processor Metavante Corp. “You can't clap with one hand.” The network, which three years ago became the first of the national exchanges to go live, is handling 12 million items monthly, a number that's growing at a 40% month-to-month rate, says Vetterick, who expects the growth rate to spike even more sharply higher. Indeed, his goal for June is 18 million images. The two other private-sector national networks (the Federal Reserve also operates an image exchange), SVPCO's Image Payments Network and Viewpointe Archive Services LLC, are processing 35.2 million and 15.8 million monthly items, respectively. Volume through all networks has ballooned to 109.6 million as of March from 3.7 million in January 2005, according to figures compiled by the Electronic Check Clearing House Organization (ECCHO). Seeking interoperability with the other national networks, Endpoint Exchange in August expects to bring live a link to SVPCO, which serves many of the nation's biggest banks. “I've got five SVPCO members that can't wait to send [items] as soon as the pipeline is up,” says Vetterick, who won't name the five. He stresses that these images will be settled through the National Clearing House Association, Endpoint Exchange's clearing house, not through The Clearing House Payments Co. LLC, the New York-based parent company of SVPCO. This link will follow by nine months a similar connection to Viewpointe, through which Viewpointe members Bank of America Corp. and US Bancorp are flowing items to Endpoint Exchange. Both of these connections should boost volume even more for Endpoint Exchange, which started out serving mostly community banks and credit unions but has sought arrangements with larger institutions, as well. Vetterick says the network's base of members has grown from 2,500 six months ago, while volume has doubled. To Vetterick, though, the key to his network is its large base of receiving institutions, a factor that can close the loop on end-to-end image exchange. While happy to send check images into networks, banks have resisted receiving and settling on images because of the complications and costs receiving introduces into their back office operations. For image-exchange networks, this has led to the ironic twist by which checks truncated into electronic formats are converted back into paper for paying banks to handle. These paper printouts of images?known as substitute check or image-replacement documents (IRDs)?are proliferating at such a rate that some bankers are looking at using a hybrid of automated clearing house debits and links to check images to expedite check electronification and move away from the growing dependence on IRDs (Digital Transactions News, May 26). “IRD volume is going up, and may peak in three years,” says Vetterick. “The need to electronify is outpacing the number of paying banks that are capable of receiving imaged items.” The volume of substitute checks in March exceeded 60 million items, or about 55% of total image-exchange volume, according to ECCHO. Endpoint Exchange, which operates a conventionally switched network in which all image files pass through a date center for routing to paying banks, requires all members to receive images within one year of going live on the network, says Vetterick. This, he says, could prove crucial as the increasing popularity of remote deposit capture drives up IRD volume even more. Remote capture, in which banks allow retailers and other corporate customers to image checks locally for deposit, has become a highly competitive weapon among banks. “Merchant capture is so valuable to the [banks of first deposit] that they are willing to print out an IRD themselves and slow boat it to the paying bank” if they have to, Vetterick says “It's so competitive it's a land grab.”