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The Road to Check Modernization: Are We There Yet?

Tuesday, October 1, 2002

Several years ago, the Federal Reserve set out on its strategic journey as a payments provider when it decided to fundamentally redesign its infrastructure for providing both paper and electronic check services. A primary goal was for each Federal Reserve district to move to centralized systems and standard platforms while improving check services. The initiative—called Check Modernization—consists of four projects, each of which addresses a critical aspect of the check-clearing process. Here's a log of the St. Louis Fed's journey so far, as well as a vision of where we're headed next.

Enterprise-Wide Adjustments

Conversion complete!

October 2001—Following the St. Louis and Louisville offices' successful conversion in April 2000, the Memphis and Little Rock offices converted to the Enterprise-Wide Adjustment (EWA) system in October 2001. EWA, a standard software platform for streamlining adjustment research and resolution at the Fed, established a common platform for check adjustments with shared data across all Reserve banks.

The Fed can now benefit from automated workflow processes with minimal human intervention and is able to resolve adjustment requests without other Reserve bank assistance. For customers, this means quicker, more consistent service across the Fed System, greater accuracy and improved reference documentation.

FedLine for the Web—Check

Now accepting customers.

February 2002—FedLine® for the Web-Check is the new web-based delivery channel for check services launched District-wide in February 2002. Compared with DOS-based FedLine, the web version offers a number of enhanced features and functions.

For one, FedLine services can now be accessed conveniently from most Internet-connected PCs, rather than a single designated FedLine terminal, making FedLine for the Web-Check an easy contingency option. Because it can be installed on PCs that communicate with a LAN, it also provides greater flexibility for downloading and uploading data (that is, MICR files) to back-end systems.

Web services also help the Fed develop and implement new or improved services faster, such as the FedImageSM Services, coming soon to the Eighth District (discussed later).

Another new web product, Large-Dollar Return Item Notification (LDRIN), will also be introduced this fall. The service will allow customers using the web service to send and receive notifications about large-dollar checks (over $2,500) being returned to the bank of first deposit.

Another significant enhancement is the new check adjustments documents-to-follow (DTF) archive. This allows customers to electronically exchange check adjustments supporting documentation with the Fed, dramatically improving the efficiency and timeliness of the adjustment process. This archive provides customers a 12-month history of adjustment activity—including advices, acknowledgement, check images and all other supporting documentation.

Check Standardization

Standardization complete!

July 2002—St. Louis became the final office in the Eighth District to convert to the standard check processing platform when it converted in July. The conversion follows those of Louisville in April, Little Rock in May and Memphis in June.

Known internally as the project with the largest scope and greatest impact on our operations, Check Standardization will bring standard hardware and software for check processing to all 45 Fed operating sites. Aside from testing with the Fed, participation in the cut-over was minimal for customers. In fact, many won't notice much change in the new environment, except slight differences in the format of advices, cash letters and account statements.

Check Standardization will help the Fed roll out products more quickly, improve processing efficiency, eliminate redundant activities and reduce costs. Customers will benefit from more uniform and national services, as well as improved efficiency once all Fed districts convert to the new platform by the end of next year.

FedImages Services

Coming soon, to an office near you!

Upcoming—The Eighth District offices will soon also offer FedImage Services. When fully implemented across the Fed System, FedImage will establish a centrally managed platform and provide Reserve banks and customers alike the national archive to make images available within hours of capture. Customers will have web access to the archive and be able to retrieve images via FedLine for the Web.

You'll hear more about FedImage Services as your Fed office's conversion draws near.

Where We're Headed

Nearing the end of our mult-year journey into what the Fed has dubbed Check Modernization, the end of project planning and conversions is finally in sight. But the efforts to improve our services are not.

"Although the number of electronic payments is expected to grow and will displace paper checks over time, industry changes and technological advances continue to challenge us to retool our check processing environment," says LeGrande Rives, first vice president of the St. Louis Fed. "An ongoing goal at the Federal Reserve is to respond quickly to market needs and remain efficient and competitive."

FedLine® is a registered trademark of the Federal Reserve banks. FedImage℠ Services is a service mark of the Federal Reserve banks.