Image Clearing Jumps Ahead of Substitute Checks for the First Time

Checks cleared by paying banks as electronic images outnumbered substitute checks for the first time in the short history of image exchange in October, according to numbers compiled by the Electronic Check Clearing House Organization, Dallas. The ECCHO statistics, gathered from three primary settlement networks, also show healthy growth in overall image exchange, with volume reaching 403 million items, up 30% over September's total. But the volume cleared as images is probably the most closely watched number in image exchange these days. Many large collecting banks have expressed some frustration with what they see as slow adoption of image-clearing capability among financial institutions, forcing the collecting banks to print substitute checks, or paper printouts of images, to allow paying banks to settle the items. These substitute checks, also known as image-replacement documents (IRDs), were authorized by the Check Clearing Act for the 21st Century (Check 21), which became law two years ago. Substitute checks are almost as costly for collecting banks to handle as original paper checks, carrying an average expense of 5.9 cents per item compared to 6.6 cents for the originals, according to researcher Global Concepts, Atlanta. Items that clear as images, on the other hand, cost just 2.7 cents. That cost difference in part has led to a major effort among some banks to explore alternatives that could speed up the all-electronic check processing intended by Check 21. One such alternative, being investigated by a 65-member group calling itself the Check-ACH Coalition, would merge the automated clearing house network with image exchange (Digital Transactions News, Oct. 30). Still, the ECCHO report indicates progress among banks toward image-clearing capability. Not only did total image-exchange volume climb in October, but the volume of items cleared as images hit 217 million, up fully 43% over September. Substitute checks grew more slowly, totaling 186 million items, an 18% increase. At the same time, the number of routing-and-transit numbers opened for image clearing was 5,978, a 15% jump from September. ECCHO estimates this number means some 5,480 financial institutions, or around one-third of the U.S. total, are receiving and clearing images. ECCHO gathers its monthly statistics from the Federal Reserve, The Clearing House Payments Co. LLC, New York, and the National Clearing House, Dallas. The Clearing House operates the SVPCO Image Payments Network, while NCHA settles for several image-exchange networks, including Endpoint Exchange and Viewpointe. NCHA released numbers on Wednesday indicating a 27% rise in image-exchange volume in November, to 124.7 million items. The Clearing House said earlier this month its November image-exchange traffic jumped 6%, to 105.1 million items. The company projected its Image Payments Network will handle 2 billion items in 2007, up from 720 million this year.