Current Status: COMPLETE (launched in April 2004 and completed in July 2004); Phase II in Development;
The project team and FSTC have released the full project reports to the industry. (See Phase I press release)
Quantifying the problem, defining industry requirements, and setting an action agenda for implementation
A. Project Summary
The FSTC Image Quality and Usability Assurance initiative has the long-term goal of defining an operational framework for the industry that ensures that any check image, regardless of its capture point, meets the industry's minimum requirements. A 90-day first phase is proposed that will quantify the problem and expected benefits of investment, develop the core requirements for image quality and usability, inventory the image metrics that can be utilized, and develop a detailed plan for Phase II. With this foundation in place, Phase II would seek to develop, test, and publish the technology and business specifications that together can be implemented by financial institutions, and technology vendors to minimize risk, maximize cost savings and ensure strong adoption of image exchange.
B. The Problem
With the Check 21 Act now law, and timetables set for implementation in late 2004, the U.S. banking industry is now quickly approaching adoption of check image exchange and check image capture at centralized as well as merchant, teller, and ATM locations. With financial institutions ultimately liable for defective or "untransactable" check images, financial institutions must ensure that image quality assessment and assurance capabilities are effective, or face significant financial, operational, and reputation risks.
Given that physical checks will be either destroyed or returned to customers at the conclusion of a payment transaction, rather than processed through the payment system, it is this groups' position that every check image capture point, whether centralized high-speed capture, or distributed low- and medium-speed capture, must have a robust, standardized acceptance/rejection engine capable of determining whether a check image is reasonably acceptable for downstream recognition and processing, and ultimate payment. However, there are no current industry-level definitions of what makes an image acceptable for processing and payment, and how the quality of an image can be ensured at a variety of capture points.
If current image quality capabilities are not adequate, especially for distributed capture points outside of the direct control of banks, financial institutions may face unprecedented levels of financial exposure. As financial institutions themselves will be liable for these faulty check images, the need to address this challenge should resonate clearly with our industry. A rough estimate of the financial exposure to US financial institutions approaches $26 billion per year:
While not a reliable figure, this does give scale to the challenge.
In addition to the financial risk of bad images, the efficiency gains of image exchange are also threatened by inadequate image quality and usability assurance at point of capture. If institutions rely on returning items to a bank of first deposit, for subsequent return processing, the amount of rework and lost efficiency gains also present a potential cost that diminishes the benefits of image exchange.
While technologies do exist to assess image quality at the point of capture, and messaging standards do exist to transmit this information between parties in the processing lifecycle (e.g. SDTU ANSI X9.37), consistent industry metrics for image quality and usability, and usage specifications for the x9.37 standard, need to be developed and adopted to ensure robust and efficient image exchange. Without this additional level of definition and associated feasibility testing, these challenges threaten to undermine the opportunity that Check 21 presents.
To summarize the challenge:
C. Solution: FSTC Image Quality and Usability Assurance Initiative
The vision of the project is to mitigate the financial and operational risk of untransactable check images by creating an industry-wide image quality operational framework that when implemented by banks, vendors, and customers, ensures check images meet industry minimum requirements regardless of capture point, vendor hardware and software, and institution.
The goals of the project are to create a working group comprised of financial institutions, check processors, solution vendors, and industry organizations to develop an operational framework for image quality and usability:
D. Phase I Deliverables:
A first phase of effort is proposed in this document to quickly quantify the potential problem in dollar and customer-impact terms, and to develop a common set of definitions and requirements that would serve as the foundation for future work. It is expected that at the end of this first phase, a go/no-go decision would be made on whether to proceed with further work against the vision and goals outlined above.
The proposed deliverable for this first phase of effort is a comprehensive foundational report, which would include the following:
E. Participants
For more information, please contact FSTC
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