Electronic Check Presentment on the Move (1995)

Electronic check presentment has been tested in fits and starts for at least ten years. Some of the proponents of ECP, including the Federal Reserve, private sector groups, and the New York Clearing House Association, have recently stepped up their efforts to make ECP more widely accepted. Pressure in the Big Apple The New York Clearinghouse surprised everyone in April when it announced a mandatory ECP start date of July 30 for its 11 bank members (altogether 20 banks work with the NYCH on EcP). The mandate is backed up by a penalty for those who don't start picking up their electronic files from the clearinghouse's ECP switch, called CHECCS--Clearing House Electronic Check Clearing System-that day. The fees will range from $.00025 to $.00125 per item not received, and will remain in effect for six months starting in August. Hank Farrar, senior vice-president of NYCH, said at ABA's Bank Operations and Technology Conference in June that after three years of trying to get member banks to implement ECP, this penalty, which the members voted on, was needed. Up to now our efforts in ECP have been like banging our heads against the wall--it's been slow in coming, he said. The reason NYCH is pushing the receiving end of ECP is because that's the hard part. It's easy to create a file to send--we have software we give the banks for free that they use to take their all-items file, create electronic cash letters, and transmit them, Farrar said. The NYCH banks can all send already. Beginning in February, the NYCH banks that aren't ECP receive ready will face another mandate--an accelerated return item deadline. From February through June, returns will be due on 4:00 p.m. on day two after receiving the electronic file. Banks that are fully live on ECP won't have trouble meeting this deadline, but banks that are behind will, Farrar said. Starting July 1, 1996, the return item window will move to 11:00 p.m. on day one. Some New York banks have been testing ECP via CHECCS. From November through April the switch processed an average of 1.1 million items a month worth $21 billion. In June, Chemical and Citibank began exchanging images of return items over But the threats may not immediately galvanize the rest of the New York banks into action. won't start July 31, says Joseph Castro, vice-president and manager of the check processing division at European American Bank. are committed to ECP in general, however, like most of our colleague banks, there are a lot of competing commitments that are taking some of our time away from ECP. We have kicked off the project and we do plan to have ECP up and operational in 1996. We fully support the NYCH initiative and look forward to participating in it. The bank is currently upgrading its check processing system and it will install Sterling Software's Vector: Presentment product to handle ECP in the last quarter of this year. But the NYCH penalties aren't driving EAB's ECP efforts, he says. wouldn't do it on the threat of fees, we're going to do it because it's the right thing to do, says Castro. It's important for the industry to embrace electronic check presentment simply because of the amount of fraud that it could decrease. The process of making the bank ECP capable should go smoothly because the bank already uses Sterling products elsewhere in its operation. Along with getting CHECCS up and running, NYCH has been working on fraud prevention. In January, it turned on a system called FANS--Funds Availability Notification System--that has a database of stop-pays and closed accounts. Electronic check files are compared to the database and the sending bank is given immediate notification of suspect items in the electronic cash letter. NYCH also is setting up interfaces with other clearing parties, such as Payment Systems Network, Visa, and other clearinghouses, so that eventually it can let its members exchange check information with banks outside the New York region. …