While check volumes in the U.S. have been steadily decreasing over the last 20 years, even at today’s volume, more than $86 Billion in transit items are returned to Banks of First Deposit (BOFD) each year. The introduction of image processing to the clearing of checks has increased the efficiency of the exchange system such that the Federal Reserve Bank now processes all checks at a single location eliminating the concept of a “nonlocal” check, reducing the clearance time and the opportunities for holds on deposited funds. These changes require that returned transit returns be processed as efficiently and expediently as possible to reduce risk of financial loss.
In 2014, All My Papers (AMP) was approached by a large regional financial institution seeking help to automate their transit check image return processing. Even though the Bank had adopted check imaging for exchange early in Check 21 era, their transit item return processing system was still largely paper-based. This system, which made use of printing and re-imaging of check items, physical routing of paper and use of disparate in-house generated computer applications did not scale well as the Bank grew.
Recognizing that change was required, the Bank developed a list of its goals for an improved transit returns system that would be faster, more accurate, cost-effective and provide improved fraudulent item detection. A system meeting the Bank’s goals needed to be accomplished in less than a year; within a limited budget; and be completed with minimal disruption to the Bank’s existing workflows.
The Bank looked at in-house development as well as off the shelf commercial solutions. While several companies appeared viable, their proposals could only partly fulfill the list of the Bank’s "must have” requirements in the timeframe and budget required.
The Bank approached All My Papers (AMP) with its list of requirements which resulted in a detailed specification that was used by the Bank to solicit bids from several vendors including AMP who was eventually selected to provide a solution. The AMP product, called X9 Returns, was delivered within budget, put into production within 7 months of contract signing and delivered the many benefits to the Bank including:
The 2013 Federal Reserve Payments Study showed that the overall rate of checks returned unpaid decreased to .41% in 2012. The average dollar value of these items amounted to $1,224. Even at today’s check volumes, this represents more than $86 Billion in transit returns.
The introduction of image processing to the clearing of checks over these last 10 years has resulted in a very efficient and expedient means of presenting deposited items from a Bank of First Deposit to the Paying Bank for payment. In early 2010, the Federal Reserve Banks decreased their processing offices to a single location, thus eliminating the “nonlocal” check. This reduced the number of days a depository institution could place a hold on deposited funds. Further, in an attempt to provide increased customer service, many financial institutions have made deposited funds available on the next business day.
The above changes and actions require that transit returns be processed as efficiently and expediently as possible to reduce risk of financial loss.
In 2014, All My Papers (AMP) was approached by a large regional financial institution (the Bank) seeking help to automate their transit check image return processing. Even though the Bank had adopted check imaging for exchange early in Check 21 era, their transit item return processing system was still largely paper-based. This hybrid system made extensive use of printing and re-imaging of check items in conjunction with physical routing of paper items and usage of disparate in-house generated computer applications. While it had served the Bank for almost 10-years, as the business grew, so did the volume of returns. By the end of 2014, returned transit item volume was becoming unmanageable and, in particular, experiencing an increase in fraudulent items.
The following workflow and description will highlight the labor-intensive and redundant steps that challenged the Bank’s ability to achieve a cost effective and efficient environment.
Bank’s Existing Transit Returns System
The system worked reasonably well for the Bank when the volume of returns was much smaller, but due to the time required to print, route and re-scan check items, it lacked scalability. Over the years, the organization grew as a result of the increased volume of returns to the point that the workload outstripped the system’s ability to promptly and accurately process returns.
Fraudulent item detection and mitigation was becoming a significantly larger and larger issue. Opportunities for fraud were increasing with the advent of electronic payments e.g. ATM’s and mobile deposits. The volume of potentially fraudulent items grew until the processing for these items reached a processing cycle time of 5 days or more. Many of the smaller value items were written off without being addressed since the Bank could not identify a favorable return on investment for a new or upgraded core and/or item processing system.
Recognizing that change was required, the Bank developed a list of its goals for an improved transit returns system that would be faster, more accurate, cost-effective and provide improved fraudulent item detection. These included:
A system meeting the Bank’s goals needed to be accomplished in a less than a year; within a limited budget; and be completed with minimal disruption to the Bank’s existing workflows. The budget requirements also precluded replacement/upgrade of the Bank’s Core and/or Item processing systems and also precluded upgraded versions of the Bank’s Core and/or Item processing systems.
The Bank first looked inside itself and considered in-house development but no strong candidate solutions were proposed.
They then looked at off the shelf commercial solutions including those from check processing system vendors. While several companies appeared viable, their proposals, even with modifications, could only partly fulfill the list of the Bank’s "must have” requirements in the timeframe and budget required.
The Bank then approached All My Papers (AMP) with its list of requirements. AMP proposed, as the first step, a full review of the requirements document completed via both onsite and phone conference discussions by one of AMP’s senior designers, who has an industry wide reputation. The result was a detailed specification that that became the blueprint for development of the X9 Returns solution for the Bank.
The AMP Solution
The AMP product, X9 Returns, is an application with features that:
Further, rather than being based on in-house developed applications, X9 Returns was constructed using standards designed to meeting ongoing industry requirements. These include:
The following workflow and description will highlight how the AMP X9 Returns system and its interface with the Bank’s core and item processing systems significantly reduced the labor-intensive and redundant steps that challenged the Bank’s inability to achieve a cost effective and efficient environment.
AMP X9 Returns System for Transit Returns
While the basic design of the legacy system’s workflow has been retained, many manual steps have been removed to simplify the system:
Under the old system, regardless of the ultimate disposition of a returned item information from each item was transcribed by operators from the printed check into one of the many legacy Bank systems for either research or data entry. The automatic routing within X9 Returns eliminated all manual re-keying of information, thus, reducing time and errors. This also eliminated the need for external system controls to balance and track items throughout the workflow nodes adding to the savings of time and money.
Faster cycle times for return item processing equates to reduced costs and risk of financial loss.
X9 Returns eliminated the former manual and error prone method of associating each return item with its deposit source. The former method required visual inspection of the rear of the check printed in the department for a deposit account number. This affected the Bank in several ways:
With X9 Returns, the depositor’s account number is stored in the system’s archive and linked to the outbound item as it was sent in the forward presentment file to the Fed. Upon return, it will be automatically matched to and debited from the depositor’s or other account within a few minutes of receiving the return file.
X9 Returns will accumulate and maintain several years of transit return item information that can be searched to create payor account “black lists” identifying account holders of deposited items that had previous fraudulent items or items returned for other reasons. The former process provided no way to quickly identify a potential problem item and caused the bank to incur the Day 1 and Day 2 payment obligations to its depositors. With X9 Returns, checks drawn against “black listed” accounts can be spotted on Day 0 prior to that day’s forward presentment file presented for collection. Security or other departments might then perform diligence on the item prior to the Bank’s Day 1 and Day 2 payment obligation deadlines and, if justified, apply additional days hold on funds.
The Bank’s legacy transit return system relied on the transport of printed paper items for interdepartmental routing. Because of this, the physical proximity of the satellite departments was limited in order to keep processing cycle times as short as possible.
With X9 Returns, all interdepartmental routing is accomplished over the Bank’s network making routing nearly instantaneous. System operators now can be located anywhere within the reach of the Bank’s network. User roles and responsibilities can be assigned to individual users via configuration files with no need for the involvement of technology staff or need to include the core or item processing systems.
User roles restrict exposure of customer information and ability to route sensitive transactions only to those with proper authorization to view/create transactions.
Since check items are no longer rendered as paper, there is less opportunity for unauthorized parties to access them, thus reducing the likelihood of theft. This also eliminates the need for physical security and secure disposal of the items printed during processing.
X9 Returns, while automating many former manual tasks, follows the workflow steps of the Bank’s legacy transit return processing system. Therefore, minimizing organizational disruption and reducing the operator learning curve during the transition.
X9 Returns required a minimal change to the item processing system to include the customer or other source account information in the forward presentment ICL file in order to ingest that information into the X9 Returns system for use when an item is returned.
X9 Returns was able to perform real-time communication with the Bank’s mainframe and other IT resources using SOAP standards for data interchange, which was already widely adopted by the bank. This allowed for initiation of intra-day holds on funds and debiting of depositor or other source accounts.
While no technology is immune to obsolescence, the Bank sought to reduce this risk by selecting a solution that used widely deployed and well accepted technologies. X9 Returns is built on industry standards based technologies:
AMP was able to provide the Bank with a feature-rich transit item return processing system that worked seamlessly with the Bank’s Core and Item Processing systems and adhered to the Bank’s existing workflows. As a result, time and cost of implementation were minimized; major disruption of a switching to a new system was avoided; and the benefits of an automated ICL file based system were delivered.
X9 Returns Workflow
All My Checks™
• Extract MICR data accurately
• Format check images for exchange
• Create ICL files for exchange or RDC
• Ready to run software application
• Increase transaction throughput
• Enable Check 21 processing for legacy systems
• Acheive improved float management
• Process check images
From Phones, Cameras, Scanners
• Extract MICR data from check images
• Format check images for exchange
• Fast programming with single call implementation
• Build Remotely Created Checks
- for presentment or exchange
-on behalf of your customers
• Produce Test ICL Files
- to debug Check 21 Applications
- without risking customer data
• View content of ICL files
• View check images
• Edit records and fields
• Print IRDs and CRDs
• Detect non-conforming TIFF tags
• Correct TIFF Tags
• Detect MICR Mis-Match
• Image IQA
• Create ICL Files
• Format ICL Files
• Save as CSV Files
• Sort & Merge ICL Files
• Conforms to latest standard
• Prints Negotiable IRDs and CRDs
• Works with many printers
• Prints one item or the entire ICL file
X9 Image Clearing
• Check Archive
• Duplicate Detection
• Research Check Items
• Forward & Return Clearing
• Imports ICL files into SQL database
• Supports 50+ ICL formats
• Return item research & sorting
• Browser-based user interface
July 22, 2014 - ALL MY PAPERS Software Selected by Tangerine Bank -- Cheque imaging technology provides low cost solution for Canadian Banks
April 10, 2013 - ALL MY PAPERS Signs Reseller Agreement with Orbograph
September 25, 2012 - Orbograph and All My Papers Form Alliance for Remote Deposit Capture & Mobile Marketplace Complementing technologies improve efficiency and reduce risk of fraud
August 3, 2012- Credit Union Times - Mobility Matters: Tracking the Mobile Banking Revolution in Credit Unions
September 28, 2011- All My Papers Announces a Software Application That Makes Every Scanner a Check Scanner - You can read the press release online by going HERE.
April, 2011- Check Deposit Challenges Using Scanners Without MICR Readers - Transaction News - You can read the article online by going HERE.
January 25, 2011 - All My Papers Updates MICR OCR SDK with Additional Camera Capture Features For Mobile Phones and Desktop Scanners
February 24, 2009 All My Papers Publishes Case Study of X9 IMAGE CLEARING Software Solution For the State of North Carolina Check 21 Processing.
December 2 , 2008 All My Papers Awarded Bid by State of Nouth Carolina for Check 21 Processing
October 24, 2008 All My Papers previews Beta version of X9 Viewer with support for the Universal Companion Document, UCD.
July 23, 2008 All My Papers Releases Software Reader for USPS 4-State Barcode
May 6 , 2008 All My Papers Releases Federal Reserve Bank MICR Conversion Utility for Check 21 Files
December 12, 2007 All My Papers Releases X9 TIFF QUALIFIER For Testing To the New ECCHO Check Image Exchange Rules
October 23, 2007 All My Papers Releases White Paper on Ramifications of MICR Mis-Match in Check Image Exchange
October 22, 2007 All My Papers Releases X9 TIFF QUALIFIER for Image Cash Letters
August 21, 2007 All My Papers Joins Financial Industry Organizations ECCHO and FSTC To Facilitate Check Image Exchange
May 2, 2007 - All My Papers Releases X9 VIEWER for Image Cash Letters
March 27, 2007 - All My Papers Releases White Paper on Check Image Exchange Interoperability and Data Integrity Issue Resolution
February 21 , 2007 - All My Papers and Unisys Deliver Unrivalled Check Image Data Precision for Financial Institutions
January 17 , 2006 - Sterling National Bank, Leveraging All My Papers Technology, Granted Federal Reserve Board Approval for FedReturn™ Image Cash Letter
October 4 , 2005 - All My Papers MICR OCR Technology Integrated into 1,050 7-Eleven Vcom© Kiosks Verifies Check Image Data
August 12 , 2005 - All My Papers Publishes a FREE white paper - Combining Remote Capture and IRD Printing, A Check 21 Strategy for Community and Regional Banks.
July 20, 2005 - All My Papers Business Partner, Aquracy LLC, uses IRD print technology in Remote Image Capture Solution.
July 18, 2005 - All My Papers and Intactis Software Inc. form Strategic Business Partnership.