An Introduction to

Check 21

by Jaguar Software

The Bill• HR 1474 passed by Congress October ’03.• Signed into law by President Bush October

28th 2003, with an go-live date of 10/28/04.• Legalizes the use of “substitute checks” as

a legal equivalent of actual check items.• Forms the legal basis of image

presentment and clearing. • Encourages the use of image based item

processing.• DOES NOT MANDATE IMAGE EXCHANGE

What it means for you• You don’t have to change anything• You can take time to educate

yourself on Check 21, imaging solutions and how all this will benefit your bank

• You can develop a sound item imaging strategy

• You can ease your way into imaging

Comparison - Before• Items are received from the FED

(courier service)• Items are proofed (single pocket proof)• Items are posted to the core system• Items are microfilmed (microfilmer)• Items are shipped to the FED (courier

service)• Items are fine sorted (reader/sorter)• Statements are prepared (employees)• Statements are printed (Laser printer)

Comparison - After• An electronic file is received from

the FED (FED Import module)• OTC items are captured and proofed

(Capture module/Repair module + check scanner)• Items are posted to the core system

(POD module)• Electronic cash letter is transmitted

to the FED (POD module)• Statements are printed (Statement module +

high speed printer and possible folder/inserter )

Available Resources• www.aba.com • www.bankersonline.com • www.icba.org • www.federalreserve.gov

Considerations 1. How and to what extent will check

imaging impact your bank?2. What level of imaging is suitable for

your bank and how can you get started?

3. How does all this work in conjunction with your core processor, datacenter and the FED ?

4. What are the true benefits of check imaging?

The impact of imaging Advantages: • Potentially significant operational

savings• Dramatic time savings • Tighter integration of front and back

office • Drastically improved fraud detection and

prevention • Greatly improved research capabilities

with full network integration

The impact of imaging Challenges: • Paradigm shift = staff re-education • Few short-term labor savings • Requires additional IT resources

and PC hardware• Has to be handled as a long-term

strategic decision (education, evaluation, due diligence)

What level is right for you?

• Microfilm Replacement • FED capture • Full POD • Branch capture with/without data

center integration • Full integration (Internet banking,

E-Statements, Check conversion and presentment)

How to get started • Set up imaging committee • Develop imaging strategy (what?

when? where?) • Evaluate imaging vendors based

on the following criteria:•Ease of use/flexibility •Reliability/customer satisfaction •Technological standards •Cost/ROI•Expertise/Personnel

Compatibility • The FED COF standard will be replaced by

x9.37 • Common file formats governed by the FED

(through the ANSI X9 committee) will enforce compatibility between vendors, the FED and third-party exchange endpoints

• TIFF and JPEG have already been established as the de facto standard for image capture with PDF as the format of choice for electronic document delivery

True benefits • Increased productivity for both front

and back office operations (POD, research, statement preparation and delivery)

• Less courier service/postage fees • Less dependence on the Federal

Reserve • More operational flexibility • You will avoid future regulatory cost • Allows individual financial institutions

to offer additional merchants services

Thank you For additional information on Check 21

contact Jaguar Software at 1-888-JAG-SOFT

Or Sascha@jaguarsoftware.com