CPA clears path for digital cheque imaging

The Canadian Payments Association on Monday released guidelines to help the financial services industry take the first step towards capturing digital images of cheques and clearing them electronically.

Software providers, cheque

printers and financial institutions will all have to abide by the Canadian Payment Association’s (CPA) specifications, which include the addition of a numeric field date in one cheque format and a mandatory serial number encoded in the bottom of the document. These and other specifications are intended to allow images of cheques to be captured so that paper cheques can be disposed of early on in the clearing process. Sometimes referred to as truncation and electronic cheque presentment, banks would destroy the original cheque and return only its image to the account holder that signed it. The CPA is working with industry and the Department of Finance to introduce electronic cheque clearing next year.

Roger Dowdall, the CPA’s vice-president of communications and education, said about 98 per cent of financial institutions already meet some specifications, such as an increase in the minimum size of a personal cheque from 6 inches to 6 1/4 inches. In other cases, he said, software providers may have to look at how they would help organizations modify the way cheques are produced. Because two date formats are allowed under the new guidelines, for example, there is a requirement to print date field indicators that can be scanned in the electronic clearing process.

“”There are possibly two scenarios there, I guess: one is that the software generates those date field indicators, and prints those as well as the date format in the required position,”” he said. “”The other scenario is that the client, in procuring their cheque stock, get those indicators on partially pre-printed stock.””

Intria Items, a joint venture formed more than seven years ago by the Canadian Imperial Bank of Commerce and Fiserv, owns a cheque-imaging equipment provider called ImageSoft that is being used by a number of financial institutions that are preparing to move to electronic cheque clearing. Stuart Warner, Intria Items’ senior vice-president of technology and product solutions, said one of the other major hurdles for electronic cheque imaging is an inter-bank systems integration test. That was originally scheduled for this June and a production rollout for early 2006. Although nothing has been ratified by the CPA, the systems integration test may not happen until September 2006, with a rollout of electronic imaging and clearing in early 2007.

“”That’s the easy part, doing the physical cheques,”” he said. “”We’re looking for decision from the CPA by end of February on what the timelines look like.””

Some banks, like RBC, have already introduced some image-based service for some client segments, but they’re doing that after the cheques have already cleared, Dowdall said. “”The paper’s still moving through,”” he said.

Warner agreed that there is still considerable systems integration to be done.

“”All the financial institutions are in different states of readiness,”” he said. “”You could have ourselves acting as their data centre doing the cheque-clearing process, but we need to send a lot of files back to their posting systems, so there’s significant changes in the actual financial systems as well.””

Dowdall said the CPA is trying to make the transition as seamless as possible, and is looking at how cheque imaging is being deployed at an international level to develop better standards for Canadian institutions.

“”There’s a tremendous amount of other work going on to identify image formats and requirements around that,”” he said. “”We’re releasing the standard now to give all the players in the industry and there corporate clients plenty of time to modify their cheques well in advance.””

Other requirements under the CPA specifications include revisions to technical features such as the print contrast signal to ensure high-quality images can be captured.

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