Web-based digital imaging is streamlining operations and enhancing customer options.

Americans write about 49.1 billion checks a year. A colossal number of those legal IOUs behave like boomerangs-no matter how far the checks are flung, they still return to their owners. Online digital images have the potential to eliminate the costly ricochet effect.

While the U.S. love affair with checks remains passionate-check usage is dropping only about 1% a year-banks are hunting for processing efficiencies. Digital check imaging coupled with Internet delivery is becoming an attractive option, and some banks are discovering that imaging applications can reach far beyond item processing. Nevertheless, many people feel great affection for their canceled checks, saving them as zealously as their high school love letters...

Robert Hunt, senior analyst at TowerGroup, believes that the cost efficiencies of online images alone are impressive. For example, providing a copy of a check from microfilm can cost the bank up to $7 and take three to five days, whereas online access eliminates both the cost and time. But, Hunt says the move to digital check images will truly be pushed by possibilities for the technology across an entire organization...

Del Mar, CA-based Bank of Internet, with $210 million in assets, opened in July 2000, and has saved a few trees and a lot of postage with its "no monthly mailings" policy. For its check imaging, Bank of Internet works with service bureau Jack Henry, which processes its checks daily.

"Every morning at six o'clock [Pacific time], customers can go online and look at their check images from the day before," says Gary Lewis Evans, president and chief executive of Bank of Internet. "The people who are tuned into it like it a lot."

The bank also is using a new document management system from LaserFiche, a division of Compulink Management Center Inc., located in Long Beach, CA. The application, LaserFiche United, digitizes and indexes all other paper-based documents-everything from loan documents to customer correspondence that will be tagged with bar codes.

Internet-only customers probably care less than others about getting their paper checks returned. Chris Musto, vice president of research at Gomez Inc., a research firm located in Concord, MA, says that Gomez asked online banking customers how willing they would be to accept an online check image in lieu of the original. Of the respondents, 68.9% were willing or very willing to do so.

While online check images might be a convenience to consumers, related technology may also prelude vast changes in their financial habits. The Federal Reserve, by far the largest clearinghouse for checks in the country, has proposed the Check Truncation Act and is developing its own digitization system, which could effectively eliminate float time-the time between when a check is written and when it is paid. Hunt says there is about $700 million "floating" in the Fed system daily. In the aftermath of the terrorist attacks on Sept. 11, 2001, planes that normally carried sacks of checks remained grounded, and the "float" figure increased to $45 billion per day for four days. The Fed wants to reduce costs and industry reliance on the transportation system to process checks.

As electronic payments and debit cards continue to gain footing, the nation's love for checks may wane. But this probably will not happen any time soon.

"We still have a whole culture that looks at the check as their primary payment mechanism, so there is a real need to process checks efficiently," Hunt says.