Check/Check 21 Services

Strategic changes lead to significant results

October 2009

The U.S. payments system has seen considerable change in the last five years. This change is primarily due to the increased adoption of electronic clearing, attributable to the implementation of the Check Clearing for the 21st Century Act (Check 21) (Off-site Link) in 2004. Adoption of electronic check clearing has progressed at a steady pace, with over 95 percent of our deposits and 75 percent of our presentments now Check 21-enabled. Throughout this transition period, the Federal Reserve Banks have taken a number of strategic steps to respond to your changing needs. These steps include enhancing our Check 21-enabled product suite, realigning our infrastructure and transportation, and modifying legacy electronic check services. Each step has been part of a larger plan directed toward removing paper from the process to provide a more efficient payments system.

Enhancing our Check 21-enabled product suite

One year after Check 21 became law, we introduced our Check 21-enabled product suite — a bundle of services to send and receive image cash letters (ICLs) electronically — that initially included the FedForward^®, FedReturn^® and FedReceipt^® Services. This suite was designed to provide financial institutions of all sizes the flexibility to combine services to address their unique requirements.

The latest addition to the suite, FedReceipt Plus for Returns, enables financial institutions to achieve virtually full, end-to-end electronic check processing. This service provides the bank of first deposit (BOFD) with an electronic file of all imageable items being returned by paying banks.

We will continue to look for opportunities to enhance our product suite to ensure we are meeting your collection and clearing needs.

Realigning our infrastructure and transportation

In addition to supporting the transition from paper to electronic payments, our long-term strategy is to reduce costs and restructure check processing operations in line with decreasing volumes of paper checks. At the same time we are continuing to promote the increased use of electronic check processing.

As the move to electronic check processing has accelerated, we have sped up our infrastructure realignment plans, going from 45 check processing offices in 2003, to one central site by the first quarter of 2010. This single, full-service paper check processing site will be located at the Federal Reserve Bank of Cleveland. A single electronic check processing site will operate at the Federal Reserve Bank of Atlanta.

We also have continued to modify the transportation infrastructure needed to support declining paper volume with the end result being the elimination of all transportation into the Reserve Banks, effective January 4, 2010.

Our restructuring plans also include consolidating check adjustments into one location for increased efficiency. The Federal Reserve Bank of Cleveland will serve as the final paper check adjustments location (PDF). With check adjustments staff in one support center, you can easily access our specially trained customer support representatives with one call.

Modifying legacy electronic check services

To further address declining check volumes, we are streamlining our electronic check services. Specifically, this involves migration of legacy Payor Bank Services toward more cost-effective Check 21-enabled inclearing services that provide all of the benefits of electronic inclearing, while helping financial institutions move to industry-standard electronic check receipt.

Our multi-year transition plan for these services, which kicked off in 2007, is quickly coming to a close. On December 31, 2009, MICR Presentment and MICR Presentment Plus with paper to follow will be discontinued. Customers who have migrated to Check 21-enabled presentment services are already enjoying the benefits of end-to-end electronic check processing and are well positioned for the final sunset of remaining Payor Bank Services at the end of this year.

Positioning for the future
The pace of migration to an all-electronic check system has been impressive. As adoption of electronic payments continues to progress, the Federal Reserve Banks embrace these changes and remain committed to responding to the financial services industry and adapting along with it to support the changing needs of financial institutions and their customers.

From enhancing our Check 21-enabled product suite, to realigning our infrastructure and transportation, to modifying legacy services, the Federal Reserve Banks have taken a number of strategic steps all directed toward one common goal: to establish the groundwork for us to provide efficient and effective payments processing today, while being well positioned for the electronic payments system of the future.

If you would like to learn more about our Check 21-enabled product suite, visit the Check 21 Service Offerings or contact your account executive via My FedDirectory^®.

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