Bankers’ Bank Northeast, along with Fidelity National Information Services, have started converting paper checks into images for client banks and submitting image cash letters to the Federal Reserve Bank of Boston.
Client banks of Glastonbury, Conn.-based Bankers’ Bank Northeast were among those affected by the closing of the Federal Reserve’s check processing center in Boston. As a result, Bankers’ Bank Northeast, along with Fidelity National Information Services (FIS), have started converting paper checks into images for client banks and submitting image cash letters to the Federal Reserve Bank of Boston.
“FIS provides not only the necessary technologies, but also a dedicated account team with the strong leadership we require of a strategic partner,” said Peter Sposito, president and chief executive officer of Bankers’ Bank Northeast. “We look forward to working with [Fidelity National Information Services] and our other item processing partners to help community banks manage the rapidly evolving check processing environment.”
The service will help many banks that faced earlier deadlines with the move of the check processing center from Boston to Windsor Locks, Conn. For banks in eastern New England, the greater distance to Windsor Locks necessitates establishing earlier cutoff times to meet Federal Reserve deadlines for receipt of cash letters. Because missed deadlines result in diminished availability of funds and therefore the loss of investment income, Bankers’ Bank Northeast looked at the new program as a way to help its client banks overcome the new obstacle.
“I think that’s what kind of spurred on [the idea],” said Sposito.
When the Boston processing center closed last year, the Fed realized it would create a problem with for banks that used it, and it opened a drop point at Hanscom Field, which is located northwest of Boston. But the deadline was still an hour earlier, so Bankers’ Bank Northeast decided to start the new service.
“We saw that as a problem for the banks,” Sposito said.
The new arrangement allows Bankers’ Bank Northeast’s clients to courier their paper items to Fidelity Information Services’ processing centers in Norwood or Chelmsford, or to Windsor, Conn., where the imaging will take place. Data will be sent to Bankers’ Bank for settlement of the clients’ deposits, and Fidelity will then transmit image cash letters to the Federal Reserve and/or to other image enabled endpoints. Because Bankers’ Bank will group multiple clients together, many of the banks will benefit from cost savings based on volume as well as strong funds availability.
‘A Satisfied User’
The entire industry is moving toward imaging, but for the time being, banks need to be able to process checks in a timely manner.
“As the Federal Reserve continues to consolidate its operations, the pressure and monetary incentive to move from paper to images is intensifying,” said Randy Fluitt, executive vice president for FIS’ Integrated Financial Solutions division, in a prepared statement. “However, many small community banks are not ready to make the transition. Our relationship with Bankers’ Bank Northeast will make it possible for these institutions to not only overcome the immediate challenges, but also to position themselves for all the advantages promised by the realization of image exchange.”
Although imaging will eventually become standard, only a handful of banks accept images now.
“That’s great and we’re taking the position that we still have to help the banks handle the paper,” Sposito said.
So for now, the program can help increase banks’ availability of funds. Bankers’ Bank Northeast looks at it as a necessary interim step, Sposito said.
According to Sposito, the new program accomplishes three things for Bankers’ Bank’s client banks: The processing charge per check is often less, the availability of funds is better and the cost of transportation is less for many banks.
The availability of funds is important for banks, he noted.
“If you don’t get the availability, you might as well not be in the business,” Sposito said.
He added in a prepared statement, “Bankers’ banks were established to serve the needs of community banks that wanted to offer their customers advanced financial services. We fulfill a role similar to correspondent banks, but we don’t compete with the institutions we serve. We are a satisfied user of FIS’ BancLine core processing system, and we knew they excel in the area of imaging, so we turned to them for a solution to help our clients. Of course, we have alliance agreements with the other major check processors in New England, and we leave it to our client banks to choose their provider, but we are pleased to be able to offer FIS’ image cash letter services as an additional resource.”
