Integrators Can Benefit From New Check 21 Act

Effective Oct. 28, 2004, the federal Check 21 Act permits banks and their business customers to create secure networks for transmitting electronic images of checks instead of having to physically transport and store the original paper documents themselves.

Check 21 provides ample opportunity to technology integrators and off-site data-storage companies because the law does not require that a Check 21 network be set up in any specific way. Therefore solution providers are free to design their own particular solutions. As long as the electronic check images being used are readable, any combination of VPN technology, check-scanning product, or archiving and storage system can be used. This means technology integrators and off-site data-storage companies can get into the Check 21 game regardless of their vendor affiliations.

Additionally, no type of financial certification is required to assist a bank or one of its customers in setting up a Check 21 network.

Viewpointe Archive Services, an IBM partner and member of IBM's ISV Advantage for Industries program, has developed the Check 21 network between JPMorgan Chase, based in New York, and Bank of America, Charlotte, N.C., said Jennifer Lucas, marketing and communications director at Charlotte-based Viewpointe.

Between these two banks alone, Viewpointe supports the daily transfer and storage of the digital images of about 75 million checks, each with image sizes of about 26,000 bytes, Lucas said. Check images from JPMorgan Chase and Bank of America have saddled Viewpointe with about 5 petabytes of stored data, which is backed up from IBM Shark storage servers to LTO tape libraries, Lucas said.

For failover protection, two VPNs are employed for the Check 21 network between the banks, one from Sprint and a second from MCI.

The investment in the infrastructure needed to support the Check 21 network was substantial, but Viewpointe has captured a long-term revenue opportunity with the project, Lucas said.

"Check 21 doesn't mandate how long a digital check image should be stored. Chase has requested that we store, for three to six months, check images that can be downloaded with high-speed access, and then they want all checks stored on tape for seven years. The customers, like Chase and [Bank of America], say how long they want an image stored and on which media," Lucas said.

Taylor Vaughan, senior vice president for treasury management services at First Horizon Bank, Memphis, Tenn., promotes the adoption of Check 21 relationships with First Horizon's business customers. First Horizon has a bank-to-bank Check 21 arrangement with SunTrust Bank, Richmond, Va., but is looking to add Check 21 relationships with customers, he said.

Vaughan said that in most cases, business customers he has encountered can be quickly upgraded with the technology needed to engage in a Check 21 relationship with the bank.

"Most business customers can use their existing communications network for Check 21," Vaughan said. "But corporate clients typically don't have a check scanner in the office."

Vaughan said First Horizon has a recommendation for the type of check scanner that should be used when joining its Check 21 network, but that technology decisions really should be up to the customer and the solution provider.

"The law is very, very simple. There are no details as to how to scan, or how the technology infrastructure is set up," he said. "They just need to make sure the equipment they use can handle the image quality, and at this point there is no industry standard for what a quality image is. You just have to be able to see it."

Gwen Gaumond, systems engineer at Twinstar, an imaging and content management consultant in Denver, is currently investigating a number of scanning, imaging and check-encoding products from vendors looking to make hay from Check 21. She said Check 21 is similar to other legislation in the sense that so much is left up to individual interpretation by those affected.

"I think all our financial customers are trying to leverage [Check 21], but it's a lot like Sarbanes-Oxley and HIPAA—you have to interpret it yourself and then stay in compliance," Gaumond said.