Monday, June 26, 2006
(RemoteDepositCapture.com / Chris Dowdell)
The Importance of Image Quality
Remote Deposit Capture (RDC) has brought processes traditionally done in the back office to the “outside” marketplace. Where check processing was once performed behind locked doors within a controlled environment by trained employees of a bank, checks can now be processed at the checkout line or in corporate offices by employees with no check processing training. This dramatic difference in the capture environment is most evident when looking at process controls, risk and image quality. In this brave new world of Remote Deposit Capture, the entire process and results depends upon what happens at the point of capture, and Image is everything.
Which of these following statements is true?
1. The key to success in unlocking all of the benefits of image exchange is the adoption of remote deposit capture on a large-scale basis.
2. The key to success in unlocking all of the benefits of remote deposit capture is the adoption of image exchange on a large-scale basis.
Take your pick. However, the key to remarkable success in unlocking all of the benefits for image exchange and remote deposit capture is moving the back office processing into the front office. This may sound scary to some but there is precedent. Consider the implementation of MICR technology in the sixties. The key to unlocking all of the benefits was the promotion of the pre-encoding of checks by correspondent banks and corporate customers. One might call this ‘remote encoding’.
Concerns for doing the same with image technology have been legality and quality. MICR technology had no legal concerns and the ABA, ANSI and ASC X9 addressed the quality concerns. Image exchange struggled with legal concerns and inertia with check truncation. Check 21 removed this and allowed banks to truncate checks without mandating that any bank or consumer present or accept checks in electronic form. However, image technology and image exchange have struggled with an impression that there are quality concerns. But somehow RDC is dramatically increasing. Are the concerns with image quality valid?
Image Quality Perspectives
Image quality refers to image usability, image legibility, image control and image assurance testing. At BAI TransPay in May 2006, one session entitled Image Quality: Perspectives and Best Practices from Leading Practitioners delivered a panel discussion by leading practitioners of electronic clearing and image exchange. The news was good. When charting what is usable v. unusable at the Federal Reserve Banks, “Image defect assessments reveal a dramatic decrease from 3% down to 0.6%.” Good news also comes from other venues.
Industry Associations Perspectives
There are industry standards derived from the collaborative work efforts of FSTC and ASC X9B. The Financial Services Technology Consortium and Accredited Standards Committee X9B Subcommittee on Check & Image Standards have arrived at a disciplined, precise framework work product. When considering image quality and the current state of the art in defect and usability assessment tools, the answers and guidelines exist.
Dexter Holt, Vice President, Image Program Office, Federal Reserve Bank of Boston proposes that the focus should be on interoperability. Mr. Holt suggests that, “Image quality assurance should be considered as a risk management tool.” He states that “ A holistic business approach should be the driver for technological opportunities and investments.” Mr. Holt advises that the knowledge about how to develop common image usability output is evolving and mentions the importance of image quality assurance at points of capture. Overall “The technology will soon be able to create standard outputs.” Mr. Holt cautions about “over investing without understanding the value of the metrics.”
Susan Long, Senior Vice President, SVPCO does not see image quality as an issue. “All one needs to know is whether the image is too dark, too light, missing or ineligible.”
Ray Gatland, Senior Vice President and Manager, Image Technology Product Development, Wachovia Corporation believes that exchange banks are talking about “ensuring that quality measurements are consistent and utilizing the same standards and levels, i.e., stringent v. weak.” According to Mr. Gatland exchange partners need to arrive at an agreement on criteria, definitions and objectives.
“The challenge is how to manage the process without hamstringing it with reject repair and false positives, while balancing the needs relative to front and back office processing.” Mr. Gatland states that “financial institutions are finally acknowledging that source document quality is paramount in the industry.” Mr. Gatland related how Wachovia has benefited from an effort to address source document quality relative to image capture and customer service. He adds, “The image quality bar has changed. It has been raised as banks have begun to rely on images that they themselves have not captured. The images now become the payable instruments.”
When asked what issues may be in store with image quality this banker predicts challenges and surprises from transitioning IRDs to image exchange. While IRDs have been accepted and growing at a dramatic pace the real surprise is that “Many images on IRDs lack quality.” Mr. Gatland also volunteers that banks used to request and test corporate checks samples at account inception and on a periodic basis. He suggests that this practice may be performed more on a problem basis or with special accounts. Likewise this testing may not focus on image quality. “This is a mistake. Source document analysis is key to image truncation success.”
Mr. Gatland adds that “The RDC environment is an exciting time of transformation. Looking at the reengineering of a process and pulling in contributions of folks not typically part of that process is somewhat similar to the time when merchant involvement was needed and acknowledged with credit cards. Depositor willingness as a component is new.” He advises, “The biggest surprise with image has been more about building momentum to overcome the low implementation rate of image exchange.”
Darryl Pilate, Senior Vice President, Transaction Services, JPMorgan Chase Bank, N.A. gets down to basics. He believes that people are really talking about two sides, “the sender perspective: to ensure clearance and archive, and the receiver perspective: to ensure that they are getting the images.” Mr. Pilate has discovered that RDC has been a bit harder than originally thought due to unknown risks. However, as a leader in the industry he and his financial institution have adapted quickly. Mr. Pilate remarks about recent changes and improvements with image quality tools. This has allowed his bank to become “more comfortable with false positives” and the ability to “override these with rewritten rules.” What others may take as surprises Darryl takes in stride. He advises that bankers understand, “Multiple and duplicate items can be a ramp-up inhibitor.” Deployment of RDC overseas has been a float + clearing + image exchange success for his bank.
Karin McNabb, Director of Product Development, RDM Corporation provides views that complement both Mr. Holt’s and Mr. Gatland’s. Ms. McNabb takes interoperability a step further and states that it is “important to trust the exchange partner and know that you share a common understanding about due diligence.” Ms. McNabb predicts, “Some may be surprised about the volume of images - teradata – there will be.” She suggests that both education and information needs continue. One example given relates to maintaining image integrity through generational iterations. Another is reliability and security: “Know your customer, know your pain, know your desire, know your objective, know what the real problem is.”
Frank Stokes, President of Technology, Conix Systems, Inc. talks about the success they have had with banks implementing image exchange with their solutions. They now return “a couple of items per day, but with valid defects.” He states, “Once financial institutions gain experience and become more educated they can lessen the criteria for wrong and bad items.” The advances he sees with signature accuracy and auto layout recognition are great news for his company and bankers. In fact, Frank states, “So much has improved I am surprised that more people are not buying.”
Vijay Balakrishnan, Vice President of Strategic Marketing, Metavante Corporation talks about the points of presentment v. central processing for image quality. Mr. Balakrishnan observes, “We’ll likely see evolving solutions and ‘verticalization’ with front ends specific to different industries such as insurance companies, brokerages, healthcare, etc.” He states, “There are very many image quality solutions in the market, with most providing very similar capabilities. Image quality, while important, is not a differentiator anymore – it is a must have.” Metavante has had marked success and has been pleasantly surprised by a pace that has been faster than people expected.
Joseph Gregory, Vice President of Strategic Sales, Orbograph comments that “Some financial institutions have focused their investments for image quality and usability on on-us items and have less stringent testing and business rules for transit items.” He logically suggests, “Bankers can learn from these experiences with their own items through analytical tools and consider image exchange and merchant capture implications”. Orbograph utilizes an enterprise solution that allows banks to pick and choose how and where IQUA tests are processed. This allows the bank to differentiate what is done with business rules in Lockbox, centralized sites, branches, and RDC sites. When addressing image quality Mr. Gregory states, “Usability analysis is a requirement. There is limited correlation between quality inspection and usability testing.”
Courtney Rand, Director of Marketing & Sales, North America, A2iA states, “IQA is simple stuff. Image usability is more complicated and a computer processor-intensive task. IUA is a difficult problem, requiring the computer to locate all of the fields on the check and insure that they contain legible, relevant and valid information.” He looks forward to industry-accepted standards, rules and education to use the technology that is already in place.
Yuri Prizemin, Director of Product Marketing, Parascript, LLC discusses recognition technologies. He talks about an array of patterns, auto-field recognition, and pre-printed data challenges. Mr. Prizemin suggests, “The identification of image usability is a question of where it is done as opposed to what is done. Image integrity can be maintained only if issues of image quality and usability are being taken into account simultaneously”.
Remarkable & Marketable
Before image exchange, banks transported physical checks to make presentments to a central facility, a correspondent or directly to another financial institution. Those wishing to exchange images needed a business case driven by cost savings and ECP cutoff extensions – in conjunction with strategic objectives. Now that back office image processing can be done in the front office there is a new business case component – and new strategic objectives. The back office meets the front office directly in the marketplace, with the help of remote deposit capture.
The two statements in the beginning of this article represent two different but similar views. They are reminiscent of the old saying: “That’s exactly the same thing, but different!” The key to remarkable success in unlocking all of the benefits for image exchange and remote deposit capture is moving the back office processing into the front office. The promotion of the pre-encoding of checks satisfied a strategic objective for alleviating costs and labor. The success was the result of acknowledging the need for providing education and maintenance support. However, the front office still was required to deliver the physical checks to the back office. RDC provides more strategic objectives and requires more support – but both are attainable with the right information, tools, processes and controls.
In Summary, Remote Deposit Capture presents substantial opportunities by enabling traditional back-office functions to be performed earlier in the lifecycle of a check. By moving the point of capture to a less controlled environment, new risks and variables are introduced. By employing technology to better control the process, many of these new risks and variables can be minimized to an acceptable level. Whatever is done, it is critical to remember that RDC is made possible, and only works if there is an image of acceptable quality and usability generated at the point of capture. In short, when it comes to Remote Deposit Capture, Image is everything.