Netlocity

Last year Nuxeo had a guest blogger from Ephesoft write about the new rules of advanced capture and enterprise content management. 

For decades, the original concept of document capture was, quite simply, scan to archive:a pre-processing step in which documents were scanned, some key index fields extracted, and then ingested as a record in case they were needed for future reference. More recently, an emphasis has been placed on scan to process: capturing documents earlier in their lifecycle and enabling electronic workflow processes that improve business efficiency while reducing paper handling and errors. Today’s legacy document capture vendors still typically operate under these old concepts.

In contrast, advanced document capture systems have advanced, in tandem with advanced Enterprise Content Management (ECM) systems, to the stage where they can now serve as an invaluable contributor to an organization’s business strategy. This new third stage of maturity, scan to insight, recognizes the enormous amount of intelligence that can be harvested from the unstructured content and the cadence of transactions that documents represent.

Unlike legacy document capture tools that limit their focus on simply finding a document again when it’s needed or accelerating individual business processes, advanced document capture and ECM team up to utilize data gleaned from documents can be used for business analysis and informed executive decision making.

Under the new scan to insight model, your organization realizes all the long-standing benefits of archiving and process automation, plus the vital new ability to analyze all of the information formerly trapped in a non-structured format. Instead of capturing a few indexing fields simply to find the document or perform a transaction, advanced capture can be used to extract relevance and meaning from all of the text within a document set. Moreover, the actual history and cadence of transactional documents (how and when they are submitted; actions performed upon them; approvals and database lookups) can also be ingested by Enterprise Content Management platforms for further analysis.

We are finding that more and more organizations are looking at advanced capture technologies as a key component of effective ECM. In fact, many of Ephesoft’s larger implementations have the document classification and data extraction functionalities embedded in the organization’s Content Management platform, including several implementations with the Nuxeo Platform. For these companies, capture is not merely a front end attachment for a content repository, documents are ingested throughout workflow processes, reflecting the fact that not all needed and available documents are created or available at the inception of a business process.

For example, with a mortgage approval process, a loan originator may obtain a credit application, w-2, and tax records from the potential borrow to kick off the process. Later on appraisals, property inspections, good faith estimates and similar supporting documents are often required. Rather than wait for all corresponding documentation to be collected and batch captured, a lender can bring documents into an already active workflow. The added benefit is that by capturing all of the information contained in these documents (either at the point the document is introduced into the content management system, or later on after the workflow is complete) the organization has a wealth of additional data to use for decision making, including potential customer/prospect marketing, portfolio health analysis, investment decisions, compliance and fraud detection.

It seems to be an accepted standard that less than 20% of corporate information is in a structured format. Even less (a 2012 IDC study estimates less than 0.5%) of available information is subject to analysis. By integrating advanced capture technology with advanced Enterprise Content Management, companies can dramatically increase the available pool of data—and in many cases data only available to them, representing valuable intellectual property—for improving process cycle times and making better business decisions.

Our partner, Nuxeo, blogs about how document capture can be a critically important part of any system that uses a content repository. They also mention how another partner of Netlocity’s, Ephesoft, offers an excellent solution for document capture, data extraction, and built-in support for exporting documents via CMIS. 

What is Ephesoft?

Ephesoft (in this case the Enterprise Edition) offers “intelligent document capture”. It provides the ability to scan physical and electronic documents, automatically process them for arbitrary content (ICR, OCR, images, etc.), and export/report on the results.

What is CMIS?

Content Management Interoperability Services (CMIS) is an open standard that allows different content repositories to interoperate. Specifically, CMIS defines an abstraction layer for document management using web protocols.

To be clear, the support for CMIS in Ephesoft means that it can export content to anyrepository that properly supports CMIS with no special tooling or integration. Nuxeo happens to have excellent CMIS support so this kind of integration is really easy.

If you would like to find out more about connecting content management applications using CMIS, watch our webinar where CMIS visionary Jeff Potts and I discuss CMIS and its value.

Ok, how does it work?

Here’s a short rundown on how to capture documents directly in Nuxeo using Ephesoft and CMIS. Note that in this example Ephesoft is running on Windows so any file paths are in Windows format.

Set up Ephesoft

You can find a complete tutorial to setting up document capture here:

http://www.ephesoft.com/wiki/index.php?title=Tutorial

I will just summarize the basic steps and follow with some helpful tips:

Create a “batch class”.

Define a “document type”.

Define the “index fields”.

Define the “key value extraction” for those fields.

Tip: I recommend using the Advanced Extraction in most cases, as opposed to the Key-Value Extraction, because it’s more explicit and intuitive.  With Advanced Extraction you visually define the explicit capture area with the label (green) and the field (red) like so:

Here’s a helpful video about how to setup Advanced Extraction:

http://wiki.ephesoft.com/advanced-key-value-extraction

Tip: Ephesoft uses “confidence” scores to determine if a document matches a particular Document Type, and if the fields match or not.  If something does not match, user intervention is generally required.  Confidence scores are not a percentage but an index that is capped at 40. For basic testing and development it’s perfectly acceptable to set the confidence score to 0 to avoid any human intervention.

Tip: If you’re accessing the Ephesoft UI from somewhere other than the host you may find that document images to not show up. To fix this you need to modify the file “C:\Ephesoft\Application\WEB-INF\classes\META-INF\dcma-batch\dcma-batch.properties”. Set the property “batch.base_http_url” to match the IP address or hostname of the Ephesoft server.

Set up Nuxeo

You need to create a folderish document into which Ephesoft will export the documents.

You may need to create a new document type in Nuxeo to support the information coming from Ephesoft. This depends on whether or not you want to reuse an existing document type – in this case beware of any events/automation for that document type – or create a new one to decouple the documents coming from Ephesoft from any existing content. In the latter case this gives you complete control over what happens after the documents arrive, without affecting any existing business logic.

For security reasons you may want to create a user specifically for Ephesoft to use, with appropriate permissions so the user doesn’t have full access to the whole repository.

Integrate Nuxeo

To integrate Nuxeo and Ephesoft via CMIS you only need to complete two steps:

Configure the CMIS plug-in.

Configure the field mapping.

Configure CMIS plug-in

Use the Ephesoft Admin Client to perform these steps.

From the “Batch Class Management” tab, open your batch class.

Select the “Module” tab.

Double-click “CMIS-Export”.

Then click the Edit button to make the necessary changes. Here is an example:

Configure the following options:

Cmis Root Folder Name – this is the folder you created in Nuxeo to receive the documents. The path should be relative to the repository name.

Cmis Upload File Extension – can be “pdf” or “tiff”.

Cmis Server URL – Use the format “http://server:port/nuxeo/atom/cmis”.

Cmis Server User Name – Nuxeo username that has write access to the “Cmis Root Folder Name”.

Cmis Server User Password – password for the Nuxeo user.

Cmis Server Repository Id – the name of the Nuxeo repository, usually “default”.

Cmis Server Switch ON/OFF – make sure this is set to “ON”.

Do not enter a leading slash.

Do not enter a trailing slash.

Click “OK” the save the edit, and be sure to click “Apply” to permanently commit the changes. Finally click “Validate” and then “Deploy Workflow” any time you make plug-in changes.

Configure Field Mapping

Locate the file “C:\Ephesoft\SharedFolders\BC4\cmis-plugin-mapping\DLF-Attribute-mapping.properties”. Here you must define the mapping between your Ephesoft document type and the corresponding Nuxeo document type. Ephesoft values are on the left, Nuxeo on the right.

Try it out!

When you configured your batch class, you defined a folder where Ephesoft will expect to find documents to import (the “UNC Folder” property). Drop a PDF or TIFF in this folder and Ephesoft will work its magic. After a few minutes you’ll end up with a document in Nuxeo at the path you configured. Easy peasy!

Tip: If something doesn’t work, open the “Batch Instance Management” tab in the Ephesoft Admin client, locate the failing batch, click the “>>” button and then the “Troubleshoot” button.

This allows you to download a copy of all the logs and involved documents for that batch. Generally the Application Log contains the most useful information.

Tip: A failing batch can be restarted using the “Restart” button; this restarts the failing step, not the entire batch! If the CMIS export isn’t working, you can easily make changes and retry just the export.

Read more Nuxeo blogs here!

Nuxeo posts informational blog tutorials that are especially helpful because of added images and great descriptions. I found one in particular that is an exceptionally helpful tip for Nuxeo users. 

Did you know you can directly edit the files attached to a document with your usual software? It’s very easy! Thanks to Nuxeo Drive, you can use the software you have locally assigned to the file type for editing. So, it’s a very straightforward integration with tools, such as Photoshop, MS Office, etc.

With the recently added features, you can edit a file directly from the document listing, which means you don’t need to actually go to the document itself. Also the document will be locked so nobody else can edit the same document at the same time as you. Of course it gets unlocked when you are done. 

Kofax Advisor blogs a technical checklist for making NHS data accuracy a priority when converting medical records from paper to digital. 

Make sure your NHS trust is responsible for the scanning technology

Why is this important? Scanning bureaus surely have their own technology? Yes they do, however the quality and capability of these technologies varies. You could take the time to find a bureau with incredibly sophisticated technology, however the risk to the trust increases, for example; what if that bureau is suddenly not available, or you need to increase capacity using less sophisticated bureaus?

The impact of volume increases, or having to change bureaus, and not managing your own technology, would mean having to rethink your whole infrastructure. By contrast. if you’re running the technology yourself, you can more easily swap between bureaus, knowing that data accuracy won’t be compromised.

Focus on optical recognition technology

Digitising complex documents such as patient records is not easy, there are multiple layers of information and styles that can make it difficult for a system to “read” and process the document accurately.

Each trust has its own forms, processes and ways of capturing information. This means that not only does the optical recognition technology have to be of the highest available quality, but that it needs to have sophisticated learning capability behind it. As it “learns” your document structure, and workflow processes, it makes information extraction and future uploads much faster.

What that means in practice is that this scanned information is turned into “process-ready information”, which can then be delivered into business systems, databases, workflows and document archives. Very robust and technically advanced systems can also automatically straighten and improve image quality for even the most challenging documents, eliminating the need to re-scan.

Make sure it’s robust

With the NHS dealing with 288,000 outpatient examinations daily, being able to handle high volumes, document complexity and efficient document extraction is crucial. The workload on the system will only increase over time, so you need to consider what your scale of use will be long-term, and not just in the immediate future. An intelligent system that can handle large-scale volumes without losing accuracy will ensure that information extraction at any point during the patient pathway is as efficient as possible, and doesn’t slow down treatment.

Without these three technical items on your checklist, you are less likely to reap the benefits of going digital, particularly when it comes to gaining process efficiencies.

Read the Kofax Advisor blog here!

Robotic Process Automation (RPA) is an emerging technology that can help many organizations that still rely on repetitive human effort to complete routine processes. In a typical, manual process, workers copy and paste information from one system to another, and then manually integrate data from multiple sources to leverage it within a process.

Kofax Advisor explains different process improvements that can be implemented quickly using Robotic Process Automation.  

What is RPA?

Unlike physical robots who sit at desks typing and occasionally revolting against their human supervisors, Robotic Process Automation employs software robots, which are better described as integration flows. These robots include powerful, dynamic process flows that provide tangible integration and automation capabilities. They mimic specific actions people take when interacting with web applications, web sites, portals, Excel worksheets, legacy green-screen apps, and email.

Why RPA now?

It took a long time for technology to mature and IT to embrace the idea that a complementary technology can now solve many integration and automation challenges faced by enterprise organizations. Also, although businesses always looked for ways to drive greater efficiencies, roadblocks such as high costs and long development times delayed their implementation. Now organizations are taking a new look at RPA to increase operational efficiency because both IT and business groups can benefit from it.

RPA replaces labor-intensive manual activities

The overarching benefits of robotic process are increased productivity and rapid ROI, powered by non-disruptive integration and rapid implementation.

Here are a few examples of organizations and business activities that can benefit from automation with RPA:

Financial services and insurance: Pulling data from multiple systems and spreadsheets to generate monthly regulatory compliance reports. Accounting and Finance: Collecting invoice and payment information from various systems and initiating credit collection investigation and follow up. Healthcare: Verifying a home healthcare patient’s eligibility through online insurance portals. Manufacturing: Handling partner purchase orders and invoices coming in through different communication channels. Transportation and Logistics: Scheduling shipments and tracking, and updating internal and external (customer) transportation management systems (TMS). Do you need an RPA solution now (not months or years from now)? Can you wait for IT to deliver the integration next year? Do you have internal and external systems (e.g., websites, portals) that cannot be easily linked other than via a nonintrusive, application UI pathway? Does your RPA project only need to be automated for a short period of time, after which you will implement a longer-term solution? For various reasons, has your organization not managed to connect modern and legacy systems together due to technical or business hurdles? Is process change is required? Is your business group is okay with automating the existing process “as is” without spending the time to design a “to be” process state?

Understanding your RPA business needs and problems you want to solve

Today, the key concept for businesses is to understand where RPA can assist and where it should be joined with other technologies (e.g., BPM/Case Management). There is no simple answer to complex business process problems, and a Band-Aid approach to process improvement can often overshadow the need for process change.

Getting started – key RPA areas and questions to consider

Here are some questions to ask yourself and your team as you consider RPA and how it might benefit your organization.

From desktop to high-volume production, Kodak has the ideal scanning solution. Many of their scanners are compatible with MAC computers. Please click here to pick out your scanner. 

Kofax Advisor blogs about the insurance industry and how it’s not widely regarded as innovative when it comes to digital technology. 

How effective is your strategic planning process at promoting digital initiatives and innovation? What would happen if you could step out of the traditional committee-based planning cycles buried in endless meetings discussing cost-benefit-analyses and long PowerPoint presentations?

Imagine the following industry scenario:

You work for a multiline insurance carrier offering a broad range of property/casualty and life insurance products.

You distribute products through both captive and independent agency forces.

You’re a member of a cross-functional team representing sales, marketing, operations, technology and actuarial.

Prioritize your top five projects for the year and justify why they made the list and their benefit to your organization.

Sound like a typical annual planning project? Now, here’s the twist: you’ve only got 20 minutes to complete the exercise and prepare a short presentation to peer groups who have been given the same or similar versions of the exercise.

The resulting recommendations may surprise you. Then again, maybe you already know the answer, but the same focus on risk-aversion in products has inhibited decision-making and innovation. Here are a few of the key observations shared by the participants:

“Companies overthink things when it comes to their digital strategy. We get caught up with justification of the expense; but if we don’t do something, someone else will.”

If you’re interested in shaking things up and promoting creative thinking in your planning process, check out Tom Scales’ report. He provides excellent suggestions as to how to embrace new ideas and stay competitive in a world where technology and nontraditional insurance competitors are changing more than ever before.

Ephesoft recently had Robin Lewis, EDRM Domain Manager, guest blog about technology and forward thinking. 

Like a lot of councils, we’re having to think about how we shape ourselves for the future. Nothing ever stays the same for very long and the pace of technological change has not only transformed how we engage citizens but how they, in turn, want to interact with us. If we want to ensure we’re fit for purpose in the digital age, this means making changes to our processes.

A key part of moving towards the future is helping our staff do their jobs as efficiently as possible, and often this can be achieved by making better use of technology. Wherever possible, our team is trying to think “outside the box”; looking at solutions we already have available on our estate and thinking about how else their functionality can be applied to allow us to work smarter across the organisation.

A good example of this is how we’re using Ephesoft’s intelligent document capture tool. Like a lot of councils we’re in the process of rationalising our property portfolio, but as we consolidate the number of offices we work from a key challenge we face is the amount of information still stored in paper format.

We already had experience of using a scanning company to digitise files and extract metadata for specific service areas on a daily basis, but what we needed for this challenge was slightly different – a process that could be used to deal with large volumes of documentation for any different team across the council at short notice.

What we’ve done is turned the process around slightly – staff in the business areas (who know their files best) add standard header sheets to their files containing all the metadata needed. The scanning company can just scan everything exactly as they receive it and transfer it securely back to us – no need to pay them to search through files for metadata. Our Ephesoft tool is trained to recognise the header sheets, split out the files as needed and send them to the appropriate area in our Alfresco document management system with the metadata attached. The beauty of this approach is that when a new team comes along needing to digitise files there is very little that the scanning company needs to change – instead we can just train Ephesoft to recognise files for the new team.

As we learnt more about the functionality of Ephesoft we have realised that it could be used to improve the efficiency of many other document-centric processes across the council. A good example is our spending approval processes, where emailed forms are being now processed by Ephesoft and automatically routed to the correct location in our document management system for onward approval. The product wasn’t originally deployed for these types of projects, but by thinking differently and expanding the number of use cases we’re helping to maximise the value we can leverage from the tool.

We’re putting down the foundations for a digital future. And everyone, employee or citizen, stands to benefit from that.

A lot of people confuse document imaging solutions with “going paperless.” And while technologies like scanning and capture can certainly be used to digitize paper, the digitization is not the end in itself. The real benefit of a document imaging system is how it can be leveraged to improve a business process.

Let’s take an accounts payable example. Say we are working with a city government with a centralized A/P department, which receives invoices. But, the city has multiple departments spread all over geographically that need to approve the invoices. Historically, a driver has delivered these invoices to each location and then picked them up a few days later after they have been stamped for approval.

A document imaging system could offer several benefits:

1. improved workflow - the driver is removed from the equation and an image of each invoice is sent to the appropriate department for approval, which saves on both time and gas

2. improved security - there is less chance of documents being lost or misplaced in a digital workflow

3. elimination of the need for paper storage

4. potential automation of data entry through the application of OCR

The real benefit of a document imaging system is that it can be leveraged to create more efficient processes.

A broader look at process improvements

Here’s a broader definition of the basic benefits listed in the example above:

workflow - this is the ability to more efficiently share, access, collaborate on, and exchange documents because they are electronic. Reduced turnaround times are a major benefit of workflow.

security and accountability - once a document is imaged, it becomes a traceable record. A user can determine who has viewed it, when, and how often. Workflow tasks can be set up, for example, to automatically notify a user that a document is waiting for approval and a notification can be sent to an administrator if no action is taken during a pre-determined amount of time.

eliminating file cabinets -  real estate can be expensive and eliminating paper storage can help reduce rent, off-site storage fees, and/or open up new space in an office. Plus, digital files, if properly backed up, as well-designed imaging systems typically are, are less likely to be lost due to a catastrophe like a fire or flood.

automated data entry - once a file is digitized, techniques like OCR or outsourced key entry can be applied to help reduce labor related to capturing information from the documents for use in data-driven line-of-business systems. After all, documents themselves are often not what is important - rather it’s the information on them that really makes business happen.

On the most visual level, document imaging appears to involve scanning a piece of paper and converting it to an electronic image. But this simple conversion process is only the tip of the iceberg. It’s what goes on behind the scenes in document imaging software that provides the reason that you may want to implement the technology. It’s the capture, workflow, OCR, ECM, and other types of imaging-related software that provides the return on investment (ROI).

Following is a look at some of the most common types of document imaging software and how they complement a document-scanning device:

Capture: This is the most basic type of document imaging software. It enables users to manage their scanning processes. Capture software can be used to control and manipulate batches, or large volumes, of documents being scanned. It can be used to track, index, and route images, as well as release them into document-management systems and other destinations. It can also be used to improve image quality. Capture software also typically provides an interface with a document-scanning device, enabling users to set up their jobs before executing them.

Automated data capture: A subset of capture, this typically involves the application of OCR and/or other types of automated recognition to help users extract data from document images. Oftentimes, a document, like an invoice that needs to be paid, is only as important as the data it contains. Being able to improve the capture of this data by making it faster and more accurate, while utilizing less manpower, is a slam-dunk area of ROI in many successful document imaging implementations.

Workflow: This introduces the ability to automatically route documents throughout an organization. Say, for example, an insurance company has to run an application through its underwriting and fraud departments before getting an approval. A workflow system could be used to automatically make sure, determined by the type of application and dollar value, the right underwriter and fraud-detection person see the document. Electronic workflows are especially effective in distributed environments where moving paper around can be time-consuming and expensive.

Records management: Records management creates control over scanned documents. With a properly implemented RM system, users can control access to documents and also monitor who is viewing a document and when. This is especially relevant in regulated environments like healthcare organizations where HIPAA regulations need to be enforced to avoid potential fines. RM systems can also be used to ensure that documents are destroyed after they have outlived their lifecycle, which can help reduce risk and cost of discovery in potential litigation matters.

Collaboration: Sharing document images, once again especially in distributed environments, is much more cost-effective and convenient and probably more secure than sharing paper. Scan-to-e-mail applications are the most basic form of this, but there are also many imaging applications that offer direct connections to popular EFSS platforms like Box, Dropbox, Google Drive, and SharePoint.

Most document scanners rely on the processing (CPU) power of the computers they’re attached too. In some circumstances this can lead to slow scanning processes.

Think about older computers. Or thin clients. In such cases it’s better to go for a scanner where the power is built right into the scanner itself, including many typical image processing functions.

Dr. Scanner and his lovely assistant present some of the highlights and key features of the new Kodak i4000 production scanner series(the revamped Kodak i4250 and i4650 Scanners and the brand new Kodak i4850 Scanner).

Office Gemini writes a blog for people who are unsure about going paperless. With various opinions on saying “goodbye” to paper, Office Gemini offers great insight and ideas. 

With so many different opinions about the journey to use less paper, many are wondering, “What’s the point?” Well, the point is to get rid of all of that paper clutter that claims your desk, your office, and your entire life. The point is to save space, time, and money. There are so many ways to go paperless that it’s easy to make the change, sometimes without even noticing. Paper is slowly disappearing, but making the conversion can be easy. Save more by using paper (less)™.

As the print journalism industry seems to be weakening, there are still many people who are holding on tight to their newspapers and magazines. We have all witnessed the decline of newspapers, especially since radio, TV, and internet became more easily accessible forms of news. Newspapers are no longer the main source of news because it has become easier to watch or listen to it while carrying on with our lives. While the sales of print journalism has declined, journalism itself will always be alive and adapting to today’s society.

Amazon, Barnes & Noble, Kobo, and many others have all made the change to digital eReaders. The huge debate over real, paper books and digital eBooks is becoming more common among avid readers. Cost, weight, and portability are among the biggest factors when deciding whether or not to get an eReader or tablet. Many have made the paperless switch and enjoy all the storage space and entertainment that comes along with them, yet others still are hooked on the look and feel of a real paper book. But getting rid of that huge bookshelf will earn you extra space in your life as well as your home.

Piles of paper everywhere can put a serious dent in your workday. Having a place to store all your documents without a chance of losing them will make your office more efficient and save money. Storing paper is expensive, and a document management system can save you all that money in the long run. With a document management system, expansion is easy. When it comes to storing paper, physical space is limited no matter where you are, but virtual space can always be added to your computer for electronic file storage.

The days of a world without paper are approaching fast whether we like it or not. With so many ways to get rid of paper and all the clutter it brings, why not try it out? Read a newspaper online, buy a tablet, and get a document management system. Toss out all that paper clutter and find a way to use paper (less)™.

Kofax Advisor does it again and blogs an informative piece about the tremendous upside of businesses leveraging information from the web. 

#1 Financial Services – Conducting Equity Research

Investment decisions depend on the most up-to-date information based on market research, extracting data from websites, and other real-time data sets. Such derived insights and forecasts can be shared with clients and drive investment debates. Without the right information, your research analysts are building models that could lack the right data. The end result is that investment managers are left without the knowledge they need to consult their clients on buy-sell decisions.

#2 Online Retail – Tracking Competitor Pricing

With the holidays rapidly approaching, every online retailer is gearing up for a profitable finish to 2015. Part of the success will come from making sure they are ahead of the game in terms of pricing and promotions.

By extracting data directly from your competitors’ websites you are able to collect thousands of pieces of information about products, pricing and availability. And most importantly, keep your organization’s product information updated and readily available to those making product and pricing decisions, ensuring a happy holiday for your business.

#3 Information Providers– Delivering Insight and Intelligence

You provide industry insight and intelligence into markets like insurance, energy, healthcare, financial services, and government. Your organization’s goal is to provide objective analysis and advice to your clients so that they can make well-informed decisions. You have the experts, the knowledge and the integrated models. But do you have all the right data?

To realize the full potential of the analysis research you provide to clients, you need a consistent and streamlined way to acquire big volumes of data—literally billions of data points.

Recently Kofax Advisor wrote a blog on the future of Cheques. The insight provided may surprise you.  

“Cheques will be around when debit and credit cards are gone.”

This was a surprising prediction made during a recent meeting of senior bankers, held at The Gherkin, London, where the customer impact of cheque image processing and digital banking capabilities were discussed.

Representatives from all of the major high street banks listened to updates from the Cheque & Credit Clearing Company (C&CCC), and Royal Bank of Scotland (RBS).

Who Uses Cheques Any More?

You’re not alone if you thought that the use of cheques as a payment method was in terminal decline, especially with the many alternative ways of bill paying that are available today.

As far back as 2009, the UK Payments Council proposed that cheques should be phased out completely by 2018. The reversal came in 2011 due to loud complaints from a wide spectrum of groups including small businesses, charities, schools and individual users.

It’st’s true that UK cheques usage has been in steady decline (from 4b in 1990 to 644m in 2014) – with having the dual disadvantage of being costly for the banks to use as a settlement method, and too slow in getting payment to the customer.

So when you take a HSBC cheque that has been mailed to you, to your nearest Lloyds Bank branch to cash it, the paper cheque itself is the instrument of exchange and has to be physically sent through the central clearing system to HSBC before HSBC sends the funds to your Lloyd’s account.

This clearing process currently takes six working days. Add the time the cheque is spent in the mail, it is no wonder that other payment methods – Internet Banking, both PC and Mobile, Paym, PayPal, Direct Debit & Credit cards – have become so popular, and far cheaper for the bank or financial institution to process.

It’s All Change for Cheques

But this is all about to change. The payment regulations are in the process of being updated to allow an image of the cheque, rather than then cheque itself, to become the instrument of exchange. This will have a transformational impact on all aspects of cheque usage, payment times and transaction costs, and will open up creative opportunities for new services and solutions.

Fiona Gledhill, the Communications & Stakeholder Manager of the Cheque & Credit Clearing Company, provided an update on the current status of these regulatory changes: “As a consequence of new legislation in the Small Business, Enterprise and Employment Act, which received Royal Assent in March 2015, images of cheques will be able to be used as the instrument of exchange between banks, eliminating the need for the physical paper cheque to be transported around the country” said Fiona. “The impact on clearance times will be dramatic.

Today’s ‘six weekday’ clearance time will be reduced to the ‘next weekday’, at significantly reduced cost to financial institutions. This initiative will also expand customer choice and open up the payment system to new ideas and new players. Importantly, this new clearing system is an open platform which allows increased participation resulting in innovative services and reduced costs through competition.”

Check 21 and the US Experience

In the US, the use of a cheque (or check) images for settlement has been possible since 2003 with the passing of the “Check Clearing for the 21st Century Act” (commonly known as the Check 21 Act). Brian Hettinger, Lexmark’s US Director of Sales Engineering, has been involved in the majority of Check 21 systems deployments in the US since 2003, and he shared with the group his personal experiences in this field.

“Check 21 stopped the paper at the bank, reduced costs and enabled faster payment times. It also opened up the opportunity for innovative and pioneering services, including decentralising the image capture function out from the bank to the corporation and the individual” said Brian. “Check 21 introduced the concept of Remote Deposit Capture that allowed corporations and individuals to use a PC-attached scanner to capture the cheque image for transmission to the bank. With the advent of the smartphone this capability has been extended to support mRDC – mobile cheque capture – where the mobile’s camera functions are used to create the cheque image under the control of an App that is integrated with the bank’s mobile banking platform. This powerful combination ensures a compliant image and accurate meta data.”

Brian looked at other innovative uses of the image-capable smartphone that are still on the horizon in the UK but are already being implemented in the US.

“The smartphone camera, controlled via an App, can ensure that a crisp, in-focus, non-skewed document image, suitable for downstream OCR, can be taken by any casual user, allowing much more sophisticated customer-facing activities to be performed remotely. For example, opening a new customer account would normally require a trip to the branch, along with proof of identity – a passport or driving license, a utility bill, council tax details. But all of this customer “on-boarding” activity can be achieved with a combination of a mobile’s camera, screen and keyboard, controlled by the bank’s mobile platform that is connected to the bank’s back-office systems and processes.

This ability to directly interact with a prospective customer via a smartphone for the critical “First Mile™” of their engagement with the bank is no longer a nice-to-have feature but is becoming a demographic imperative. Most consumers choose their bank at an early age, then stay with them for a very long time. But to reach the millennials, who likely never visit a branch, banks will have to offer remote on-boarding – if they don’t, the next generation of customers will simply choose a bank that does, and the bank’s customer base will begin to wither on the vine.”

Brian concluded the UK is in a better position than the US was in 2003, in that 76% of UK customers already have a smartphone and so image-based cheque clearing can be designed with mobile devices in mind from the get-go.

A Payments Perspective

Eric Crabtree, Director of Omni-channel Banking at RBS, and previously Director of Strategic Transformation at Barclays UK, shared with the meeting an overview of the past, present and the future of payment systems to give the context within which image-based cheque payments will have to compete and survive.

“At the current time, circa 50% of all payments are non-cash, 24% of those use Direct Debit cards, with an increasing number of these payments via contactless technology. In the UK, Paym mobile payments services developed by the Payment Council, such as Barclay’s Pingit, are available to registered users. Third-party peer-to-peer (P2P) payments, like those available between PayPal customers, bypass the normal bank payment systems for individual funds transfers. Because we see an increasing number of “walled garden” payment technologies emerging, for example Apple Pay, at RBS we are looking to partner with these technology companies so we can accommodate their alternative payment platforms into a unified customer experience, while at the same time reducing costs for the retailer. Looking into the future, biometric authentication and wearable technology will also need to be incorporated into the customer experience – and so the open payment platform approach that Fiona at C&CCC is promoting will be essential in accommodating all of these future payment alternatives.”

Looking to the Future

Moving beyond cheque image capture to more sophisticated imaging applications, such as customer onboarding as outlined by Brian Hettinger, might be seen as another threat to the beleaguered branch network.  The banking industry’s current strategy of turning their branches into advisory, rather than transactional centres. By enabling customers to perform many of the traditional branch activities on their mobiles, the advisory branch can now focus on higher-value advisory (and sales) roles. This will mean less service counter space and more face-time around the desk discussing the customer needs, aspirations and problems with an up-skilled branch adviser.

And the prediction that cheques will outlive credit and debit cards? Eric Crabtree says “All of the technology that today is embedded in credit and debit cards can be, and will be, incorporated into your smartphone and your other digital devices. So you will either pay digitally – or send a cheque”

So what keeps bankers awake at night regarding these impending changes to the payment system? Fiona Gledhill worries that if the new image-based clearing system is too difficult to work with then financial institutions will finally turn away from using cheques to other payment options. From a technology perspective, Brian Hettinger knows that the new clearing system will need to be robust enough to detect, in real-time, fraudulent dual deposits of the same cheque to separate bank accounts. And Eric Crabtree of RBS notes that the traditional role of the banks can be undermined by new technology players that RBS worked with in providing an integrated payment experience for their customers.