If you go rummaging through most musty attics or damp basements, you're likely to come across canceled checks -- hundreds of them.
The return of canceled checks to customers is one of the long-standing traditions of banking. But it is a tradition that is increasingly expensive as postage rates go up and the cost of handling millions of pieces of paper climbs higher.
But a few banks are starting to replace this tradition with the new technology of computer imaging, which allows the printing of more than a dozen canceled checks on a single sheet of paper. The process also allows for the more efficient handling of checks in the backroom operations of banks.
About half the checking statements sent out by banks weigh more than 1 ounce, the limit for the 29-cent postage rate, according to Stephanie Berger, the new business development manager for Nationar, a New York company that provides services to banks, including check imaging.
A checking statement with 54 canceled checks would normally cost 75 cents to mail, Berger says. But the postage for the
same check with imaged checks would be pushed back to 29 cents, she says.
So far, only a handful of banks nationwide have adopted the new system because of its relatively high cost. But the new system is gaining converts.
"It's been very successful," says Lewis N. Miller, president of Central Fidelity Bank Inc. in Richmond, Va. "This makes good plain common sense."
The bank, which has assets of $6.5 billion, has been offering the new service for the last year and a half and about 80 percent of the new accounts are now signing up for it. Overall, about 50 percent of the bank's checking accounts now have imaged checks returned to the customer, Miller says.
To encourage acceptance of the new system, the accounts with check imaging have lower fees, or no fees at all, compared with the traditional accounts that return canceled checks. The bank also maintains microfilm records of all checks, and customers can obtain a copy of a check -- front and back -- within 24 hours.
The imaged statements do not include a picture of the back of a check, which may be necessary in a legal matter.
Miller says the bank has been able to save on postage and processing time with the new system, and the cost of the equipment was not that expensive. "It was really a no-lose situation," he says.
Under the imaging process, checks are fed into a machine that scans the checks and produces an image that is stored in a computer. Then, after going through a video buffer that removes unnecessary information, the checks can be called up on a video screen for review. These images are then sent to the main computer, where they are matched up with account information, and then they are printed out on a laser printer.
No Maryland bank has yet offered imaged statements, but Signet Bank, a Richmond bank with a large Maryland operation, has installed an imaging system for backroom handling of checks and may begin sending out imaged statements by the
end of this year, according to Ben F. Vaughan, senior vice president in charge of processing centers for Signet.
The new system, which was installed in November, can process 1,800 checks a minute, or about 1.2 million checks a day in the Richmond office, Vaughan says. Besides recording the image of the checks, the system detects most common information entry errors.
The operation dramatically reduces the labor intensive repetitive handling of checks. Bank personnel can now simply call up checks on computer terminals, Vaughan says.
The system, which cost the bank $7.5 million, is expected to save $8.5 million to $12 million over the next five years, Vaughan says.
Besides giving convenience to individual customers, the new technology also holds the possibility of making life easier for businesses that must contend with thousands of canceled checks. All those canceled checks may eventually be reduced to information on an optical disc, which can be retrieved with the use of a computer.