check 21 changing how banking is done today
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Check 21 Changing How Banking is Done Today. Presented by: Kimberly Feeney, Vice President Government Treasury Services Bank of America 312-828-2582. Agenda. Overview of Check 21 Legislation Check Transformation: Conversion vs. Truncation Payment Trends A Check 21 Solution for Deposits - PowerPoint PPT PresentationTRANSCRIPT
Check 21Changing How Banking is Done Today
Presented by:Kimberly Feeney, Vice President
Government Treasury Services
Bank of America
312-828-2582
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Agenda
Overview of Check 21 Legislation Check Transformation: Conversion vs. Truncation Payment Trends A Check 21 Solution for Deposits Questions
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Check Truncation: The Check Clearing for the 21st Century Act
Purpose of Act To facilitate check truncation To improve efficiency in the U.S. banking system by
eliminating the need to transport paper checks for presentment between banks
To facilitate broader use of electronic check processing without mandating any bank to change its current check collection process
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Requirements of ActBanks must process substitute checks if receivedBanks must notify customers that they may not be
able to receive their original check Banks must abide by a new set of rules for re-
crediting consumer’s accounts under certain circumstances, on an expedited basis
Check 21 was signed into law on October 28, 2003 and became effective October 28, 2004
Check Truncation: The Check Clearing for the 21st Century Act
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Check 21: A Closer LookCheck 21 is designed to encourage innovation in the payment system by removing key barriers to
check truncation Check 21 allows banks to provide a substitute
check, also known as an Image Replacement Document (IRD), in lieu of an original check
If you receive your paid checks with your statement, you may now get IRDs insteadCheck 21 does require that banks accept a
substitute check generated from an image (IRD)Check 21 does not force all banks to accept
images
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Once a check is truncated and turned into a substitute check, its legal standing does not change The item is still considered to be a check and
continues to be governed by the Uniform Commercial Code (UCC)
Check truncation applies to all checks, both corporate and consumer This includes travelers checks, money orders and
cashiers’ checks Check truncation has no dollar limits
Check 21: Fundamentals
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When is it a Legal Equivalent? Contains image of front and back
of the check Conforms to industry standards:
MICR and physical characteristics of check
Accurately represents all information on original check
Substitute Check (IRD)
Is suitable for automated processing
Bears legend Includes all endorsements Includes identification of party
creating it
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Check Transformation: Defined Check Conversion transforms a check to electronic
settlement Converting a paper check mid-life cycle to something other than a
paper check Example: conversion of returned checks to ACH transactions
Check Truncation transforms a check to image-enabled electronic or paper settlement Using electronics to improve the existing check payment system Example: electronic check presentment and the Check 21 Act
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Check Conversion and Check Truncation Sound Similar…
Check Conversion: Changes the check’s legal
standing Once converted, the transaction is no
longer governed by UCC, but by Reg E
Some transaction types have dollar limits (POP and RCK)
Requires customer authorization (except for RCK)
Applies to consumer transactions only
Is available today
Check Truncation: Does not change the check’s
legal standing When check is truncated and
turned into an image, it is still considered a check and continues to be governed by the UCC
Has no dollar limits Requires no additional
customer authorization Applies to all checks Is available today
…However, there are differences
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What are the benefits to your school district?
Check Transformation: Benefits?
Faster access to funds Expedited check processing Reduced transportation costs Faster notification of returned items, based on faster
deposit time Frees up resources
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Payment Trends
0%
20%
40%
60%
80%
100%
2001 2005 2010
Checks ARC ACH Credit Card Debit Card
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Payment Trends ACH Annual Growth: +15% Debit Annual Growth: +12% Credit Annual Growth: +8% Stored Value Annual Growth: +8% Wires Annual Growth: +5% Cash Annual Growth: +2% Check Annual Decline: -5%
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Payment TrendsWhy is Check Volume Declining?
Changes in Consumer BehaviorCredit/Debit CardsACHElectronic Bill Payment
Changes in Corporate/Government BehaviorACHCredit Cards
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A Check 21 Solution for Deposits
Features of a typical bank deposit
Processed daily Time to prepare: 20 – 60 minutes Usually hand-delivered to banking center by local
staff (not armored carrier)
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What if….
You didn’t have to take your checks to the bank You could speed the time to deposit (good funds) You could reduce risk through faster notice of
returned checks You could enjoy the benefits of efficient paperless
processing
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Remote Deposit – a Real Solution
Remote Deposit can replace your current process of accepting and processing checks with a more
efficient and cost-effective process
Remote DepositGets your deposits to the bank fasterCan reduce risk since checks are presented
sooner Allows each location to make deposits to a central
accountEliminates the paper check at the earlier point in
the cycle for most efficient paperless processing
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How Electronic/Remote Deposit Works
Depository BankYou scan checks, transmit to bank
Depository Bank captures image and MICR information
Software determines if check is ARC-eligible (option) or not,
and determines optimal clearing route, ARC or Image
Paying Bank
Paying Bank processes
ARC, IRD or check image
You receive checks
Item routed through payment system:
• ARC – to Fed or Clearing House
• IRD or Image– to Paying Bank
Consumers receive information on their statement:
• ACH (ARC)• IRD• Check truncated
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Electronic/Remote Deposits
What do you need to implement this service? Check Scanner Software to store the images and create the
deposit Fast and secure transmission method Partner with a financial institution that will accept
electronic deposits
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Electronic/Remote Deposit
Benefits: All checks are eligible Eliminates transportation costs Reduces encoding errors and deposit adjustments Customer service research requests are
expedited by providing access and search capabilities of the deposited item images.
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Things to Consider
Remote Deposit is an emerging serviceBank needs to be capable of accepting an imaged
check depositOpportunity to re-engineer your deposit processScanning equipment and software for each
location To your customer, the check truncation option is
almost transparentACH rules and regulations apply for ARC option
Thank You
Presented by:
Kimberly Feeney, Vice PresidentBank of America231 S. LaSalle StreetMail Code: Il1-231-06-12Chicago, IL 60697(312) [email protected]