Going Modern: Fed Brings Check-Processing Systems into the New Millennium

In order to stay competitive in the check-processing market and anticipate—rather than react to—industry needs, technology and the legislative environment, the Federal Reserve System is undertaking an extensive initiative called Check Modernization.

Despite the popularity of electronic payment systems such as ACH, check volumes continue to grow. Additionally, because of bank deregulation and consolidation, many financial institutions now process their checks at multiple Federal Reserve facilities. Many of these check-processing facilities have been using different hardware, software and procedures to process checks. This inefficiency has been inconvenient for many customers.

The goals of Check Modernization are to:

  • reduce the ongoing costs of check services;
  • reduce the time needed to develop and roll out new products;
  • facilitate the transition from paper to electronic check services; and
  • improve the consistency, uniformity and quality of our products and services.

Customers have a lot to gain. Check Modernization will standardize check-processing services across the entire Fed System and will transform the way the Fed delivers paper and electronic check services. The initiative encompasses four separate projects, each with its own project team and implementation timeline.

Check Standardization is a System-wide effort to provide consistent, standard hardware and software platforms for check processing at all of the System's 45 check-processing sites. Additionally, the new platforms will enable all Fed sites to eliminate redundant activities, adapt more easily to volume fluctuations, adopt new technologies, develop and roll out new products in a timely manner and improve long-term processing efficiency.

Enterprise-Wide Adjustments will move check adjustments to a common software platform. Once implemented, processing sites will be able to process adjustments on a shared platform across all Reserve banks. Financial institutions will have a more-streamlined process for submitting automated adjustment requests, and adjustment cases will be resolved more quickly and accurately.

FedLine® for the Web is a new Web-based electronic access and delivery channel for check services. Check products currently offered on DOS FedLine® will be available on the new, secure Internet platform. New check services for the Web will be introduced over time. Using a standard Internet browser and an Internet service provider, financial institutions will have the flexibility of accessing check services from any PC in any location. The Federal Reserve's web server will employ state-of-the art security, including the use of digital certificates of authority and encryption. This will ensure safe and secure access to our system and delivery of sensitive information only to authorized individuals.

Image Services System is a project that will establish a standard, centrally managed hardware and software platform for check imaging, along with a centralized national archive for images. This national archive will allow any Reserve office to promptly retrieve any check image, regardless of where the check was processed originally. Customers also will be given new options, which will allow them to quickly access their own digital images via the Internet. They may look for single items or entire batches of checks. They also will have the ability to receive bulk delivery of images via data transmission, magnetic tapes and CD-ROMs.

Check Modernization represents a significant investment in System resources, and it will take several years before all of the projects are fully implemented across the country. Some efforts, such as standardizing platforms, are being installed one-by-one at each of the Reserve offices. The Enterprise-Wide Adjustment system is the front-runner project, with installation well under way nation-wide. The Eighth District will be fully converted by year-end. Check Standardization will begin next year in the District and will continue to be implemented on a staggered schedule. Conversion to the Image Services System will follow approximately four months after the Check Standardization project is complete.

The Business Development office will provide financial institutions with ample notice for all local cut-over activities. If you have any questions about the Check Modernization, please visit the national Financial Services web site, www.frbservices.org; under "Service Information," select "Check." You also may contact Cheryl McCarthy at (314) 444-8459, or 1-800-333-0810, ext. 44-8459.

Subscribe

Keep up with what’s new and noteworthy at the St. Louis Fed. Sign up now to have this free monthly e-newsletter emailed to you.