Check/Check 21 Services

i3G: Eliminating the final barriers to image exchange

April 2009

In just over four years, the financial services industry has made enormous strides in migrating from paper to electronic check processing. Throughout this migration, unanticipated obstacles have created operational challenges for the industry. These challenges affect financial institutions of all types and sizes, which is the impetus for creating i3G, a U.S. financial services industry collaborative formed by a small and diverse cross-section of banking organizations.

“The U.S. paper check system has had over 50 years to be tweaked and ‘perfected’; the check image system, just four,” stated Fred Herr, senior vice president in the Federal Reserve Banks’ Retail Payments Office and member of i3G. While the industry has come a long way in those four short years since Check 21 was enacted, it has also experienced many costly operational hindrances, like sorting out the effects of large-scale duplicate file events. These types of exception situations are barriers to realizing the efficiencies of straight-through processing (STP) and, in extreme cases, adversely affect bank customers.

As announced in an i3G press release (PDF) issued February 10, 2009, work group participants (see box at bottom for list of representatives) have come together with solutions to quickly address a large percentage of exceptions processing throughout the industry. More information surrounding the formation and goals of the group can be found in the January 2009 FedFocus.

i3G has put forth industry best practices, recommending better intra-industry communication and influencing industry organizations’ rules and standards to execute solutions. “We’re excited to be gaining traction with i3G’s core initiatives by taking a phased approach to tackling the issues at hand and putting forth recommendations,” stated Marie B. LaQuerre, senior vice president for Image and Electronic Payments at Bank of America and member of i3G. In the presentation, Getting Traction: Eliminating the Final Barriers to Check Image Exchange, provided at BAI TransPay^SM on February 25, 2009, LaQuerre and fellow members of i3G shared detailed recommendations to address four of the “last mile” exception issues:

1. Proper use of bank of first deposit (BOFD) endorsement records: Warrants attention due to the current slow and costly returns process and subsequent negative affect this can have on customers.
2. Duplicate file presentment handling: Addressed at TransPay with the group’s contention that while duplicates will never be completely eliminated the industry needs a standard approach for duplicate handling.
3. Standardize the approach to Tagged Image File Format (TIFF) tag use: Lack of industry-shared standards for TIFF tag use, as well as non-standard or “variant” tags, creates interoperability challenges and technical barriers for image exchange.
4. MICR line requirements for imaged items: Lack of an image exchange standard for MICR line data in required and optional fields presents another paying bank burden.

More details regarding the above “last mile” exception issues can be found on  i3G’s information page on FRBservices.org.

The next phase of issues the group will address includes:

• Image returns (incoming monetary returns)
• Clearing of non-imageable checks
• Electronic adjustments
• Image integrity

As the i3G workgroup continues to make recommendations for eliminating these and other barriers to check image exchange, information will be provided on i3G’s LinkedIn group page (Off-site Link), as well as in future FedFocus issues and upcoming industry events.

"BAI TransPay" is a service mark of the Bank Administration Institute.

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