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In an age of EFT, Americans still cling stubbornly to checks. Some ATM deployers are catering to consumers depositing, cashing checks. by Ann All, editor

March 11, 2002

A study conducted by The Green Sheet, a financial services industry newsletter, shows that consumers still like good, old-fashioned checks, despite the rise of debit cards and other EFT payment methods.

The Green Sheet estimates that more than 68 billion checks are written each year, 37 billion by individuals. According to the study, Americans write an average of 25 checks each month. Checks remain the most popular payment method with 45 percent of the survey's 1,000 respondents, followed by cash (29 percent), credit cards (13 percent) and debit cards (9 percent).

With checks here to stay -- at least for the time being -- some deployers are expanding check-related services at the ATM.

Several companies, including Oceanside, Calif.-based Check Central, San Franciso based InnoVentry and Dallas-based Affiliated Computer Services, deploy machines that offer check cashing along with more traditional ATM functions. While initially targeted toward consumers without bank accounts, the machines are proving popular with a more diverse audience.

Lee Swanson, president of Check Central, said that preliminary surveys at the company's beta sites show that about half of their customers have bank accounts, but "they don't have half an hour to wait in line at the bank to cash a check." Those customers are willing to pay a 2 percent service fee to cash payroll and government checks. Check Central, a subsidiary of the Greenland Corporation, plans to begin cashing third-party checks soon.

Check Central just installed one of its SmartCash ATMs, which also dispenses cash and money orders, at a Texaco/Star Mart store in California. Five more machines will be deployed next week, and the company anticipates a major rollout in September.

Every picture tells a story

PNC Bank has installed check scanners on about 150 of its ATMs in the Philadelphia and Pittsburgh areas. They allow customers to deposit their checks or cash them to the penny. They also can display images of checks after they are inserted into the machine.

James S. Walker, manager of self-service banking, said PNC customers appreciate the ability to cash a check, make a deposit and get cash back, all in one transaction. An added convenience to the customer is that no deposit slips or envelopes are required.

Eliminating the extra paper also helps the bank process checks quicker and more efficiently. "A lot of time and effort goes into processing envelopes, whereas a stack of checks is much easier to deal with," Walker said, noting that it takes a teller about a minute to process a check in an envelope compared to 10-15 seconds for a check only.

After a customer's account information is printed directly onto a check at the machine, "it becomes part of a check's history," Walker said. That reduces the hassle if a check gets separated from an envelope or slip.

PNC can't begin the collection process until it has a check in hand, but Walker said reading a check's microline at the ATM allows the bank to make a more informed decision on whether or not to cash it.

"If it's a PNC check, obviously we can see if there's any money there," he said, and PNC keeps a list of companies for whom it cashes payroll checks.

Perhaps the biggest advantage of ATMs with advanced check functions, Walker said, is their power to promote customer migration. "Machines with these capabilities can do a much higher percentage of the transactions a customer wants to do."

Anderson Imaging, an Orange County, Calif.-based company that produces a variety of imaging products, makes a check scanner that is designed for ATMs. Anderson scanners are used in NCR machines, among others. Shane Kirk, Anderson's marketing manager, said his company's product differs from others that are modified for ATMs. "Some companies just remove the casing and try to make it fit into the machine."

Kirk said the company originally believed that the scanners would be used in kiosks at bank branches. But with the advent of check-cashing ATMs, "we've seen new markets opening up," he said.

"If you have a machine that does it in two or three minutes, versus waiting 20 minutes at the bank, why not use it?" Shane Kirk of Anderson Imaging

Like Check Central's Swanson, Kirk thinks there is a mainstream market for check cashing at the ATM. "If you have a machine that does it in two or three minutes, versus waiting 20 minutes at the bank, why not use it?"

In fact, Anderson is getting into the ATM manufacturing business. Kirk said the company produces a low-cost cash dispenser, two higher-end ATMs with check scanners and two models with both scanners and checkbook dispensers, which print new checks for customers while they wait.

One checkbook dispenser prints 10 to 20 checks, while a slightly more expensive version prints 25 to 30. The machines can be programmed to handle tasks like address verification so, for example, a customer who has moved can update his or her address.

U.S. certification of Anderson's machines is pending, although the company is selling machines in Europe.

NCR's PersonaS ATMs are equipped with a document image scanner that can take a digital photo of a customer's check, front and back, and displays it on the screen. The machines also can be programmed to print a photo on the receipt, which may alleviate some customers' concerns about feeding their hard-earned money into a box.

Paper chase

Joe Kniceley, vice president of marketing and product management for NCR's Payment Solutions Group, said that 35 percent of ATMs in the U.S. accept deposits. "According to our calculations, each of those ATMs processes an average of 25 deposits a day and that number is growing," he said.

While more deposits at the ATM frees up tellers on the retail side of a bank's business, it creates more work for the operations side. A proliferation of mergers has scattered networks across a wider geographic area, which makes it more difficult just to collect deposits.

"Many major banks process as little as 20 percent of their deposits the same day," Kniceley said. Yet funds deposited at an ATM before 2 p.m. must be available to customers the next day, per federal regulations.

Without a check in hand, back office personnel often make decisions based on transaction data from the switch. That's a potential fraud problem, Kniceley said. "They don't really know if there's anything in that envelope or not."

The document image scanner can compress the image of a check at the ATM after a deposit is made and send it over a TCP/IP network to an image-based processing system such as NCR's ImageMark POD. Then, Kniceley said, "The people responsible for check processing have all the information they need to begin."

Kniceley believes the earlier paper can be removed from the transaction process, the better.

"When that paper is in transit in some courier truck, it's a dead item," he said. "With our approach, after you've captured the images, you can be doing data completion in the back office before the check even shows up. When a check does show up, all we have to do is power encode it and we're done."