Electronic Payments: More Choices, Rewards and Risks

At the Association for Financial Professionals' 2005 annual conference, Business Finance brought together a panel of treasury professionals to discuss Check 21, remote deposit capture, the proliferation of payment systems and payment fraud.

Business Finance: With Check 21 in effect for a little over a year now, what initiatives are under way, and how are they going?

Robert J. Pedersen: We have a couple of tests in place, and so far there's more smoke than fire. We're going back to see how much we should be investing in this infrastructure. With checks declining and card payments rising, should we be rethinking our investment? So we're asking questions.

Mike Fossaceca: Check 21 definitely offers a compelling vision. It has the potential to revolutionize how we clear checks. Full image exchange has been slow to take off because many banks are not enabled to accept images. Until banks make that investment in technology, we have to have both the physical delivery systems and the electronic. Where we are seeing movement right now is in remote capture solutions.

David Saporito: From a bank perspective, the last year has been very busy in terms of building out the infrastructure for sending and receiving images. We are seeing a lot of interest in remote check capture from our corporate clients.

Patrick Gutmann: With image exchange, the adoption rate will probably be more moderate than some of the aggressive forecasts we've seen. From a bank perspective, it's a tremendous undertaking to build the entire infrastructure to do full end-to-end image exchange, including all day-two functions.

Lynn VanPelt: From a midsized-company perspective where in-house lockbox processing is not feasible, we are anticipating accelerated lockbox float availability with Check 21. We would like to shave off those one or two days of float.

Pedersen: Another issue is the possibility of banks processing in areas where they don't have a footprint. With bank consolidation, we've been concerned about decreased competition. If a bank can compete without having a footprint in an area, we're much better off. If Check 21 facilitates that, that's a terrific outcome.

Frank Bruno: We share that sentiment. I think there's going to be a lot of opportunity out there for good banks that commit the resources into setting up these processes.

Michael Daley: You're seeing smaller banking institutions enter markets they couldn't have entered in a physical environment. It's been a great catalyst for paper-to-electronic migration. As an industry we're maintaining very large infrastructures for paper processing, and we're interested in displacing those costs.

Daniel Rosenstein: Check 21 is having its desired impact, which is that checks are no longer dependent upon the transportation system. As a result, checks will be able to clear even when airplanes are not permitted in the air, such as on September 11, 2001.