Automated tape storage for check image archival

Computer Technology Review, Dec, 2004 by Jeff Laughlin

The world of check processing is changing significantly, whether your bank is ready or not. Under the Check Clearing for the 21st Century Act, as of October 28, 2004, financial services institutions can remove paper checks from the check collection or return process. That's great news for organizations looking to tighten cost structures and improve customer service. And, of course, this will also strengthen business performance. Even better, declining technology costs make the investment all the more worthwhile. To realize the full benefit, however, it's vital for your bank to think in terms of building a seamless end-to-end check-processing environment.

As image technology continues to establish its place in the check processing industry, we see more clearly than ever the opportunities and challenges this technology will produce.

There are now demonstrable pockets of implementation success in image POD (proof of deposit), image statements, image cash management and regulatory compliance which demonstrate that the business case potential for check imaging is legitimate and that the foundation technology is sound.

JP Morgan Chase, one of the largest banking companies in the United States, has completely re-engineered its check processing operations. This spans the entire process, from electronic imaging of individual checks--an average of 12 million per day--right through to delivering a copy of a single check when requested by a customer. An automated tape storage solution is the key to the success of this monumental check imaging project. Other financial institutions including Commerce Bank, Fleet, and Wells Fargo have implemented check imaging as well.

Prior to JP Morgan Chase's re-engineering efforts, each check was "touched" approximately 12 times during processing. The automated tape storage solution helped reduce the average number of touch points to just two. Additionally, with high-performance tape drives and libraries and high-capacity media, turnaround time for check retrieval is reduced from up to three days to as little as 20 seconds. When fully implemented, JP Morgan Chase will have the ability to store up to 750 Gigabytes of information, or more than 18 million check images, a day. This system will provide online access to checks, statements, loan applications, reports and other documents that have historically been stored in paper and microfiche formats. The solution also allows Chase to optimize the use of valuable floor space in the company's data center. The bank's seven-year archive will be the largest in the industry--over 1.9 Petabytes or 1,900,000,000,000 Bytes--and hold images of 21 billion checks. Chase's check image reengineering will save an estimated $2 billion to $3 billion a year in paper processing alone.

Success stories like Chase's have also served, however, to highlight some of the key challenges which remain. Significant among these challenges is the topic of archival. Each major check image application has a critical archival component; and invariably the question which must be addressed is whether electronic check images can be stored on a media that is cost-effective and yet provides the access time and data security these applications require.

The data storage challenges which accompany migration to check image archival are to some extent self-evident. For instance, the 80 Bytes of MICR (Magnetic Ink Character Recognition) data per check that financial institutions have traditionally stored is now accompanied by an additional 40,000 Bytes of image data per check, creating an immediate 500-fold increase in storage requirements. Until recently, with the relatively low cost of microfilm, there simply has been no way to justify the added expense of archiving high volumes of digital check images. While microfilm is known to be plagued with quality problems and a high labor cost for retrieval, its place in check archival has remained intractable absent any clear business case to the contrary.

Automated tape systems (tape drives, libraries and high-capacity media) for storage have fundamentally changed the debate concerning image vs. microfilm. For the first time, the cost of tape libraries and media for storing and retrieving check images has fallen below the film and developing cost of microfilm. This means that for any bank making a decision to adopt check image capture, the decision to adopt check image archiving should be automatic.

There are many providers of automated tape storage technology today. There are few emerging storage applications in any industry which so dramatically leverage an automated tape system's product strengths and directions as is the case in check image archiving. In pursuing tape's commitment to check image archival, there are many vendors aggressively partnering with banks and key software vendors to ensure that tape delivers a solution which continues as the technological best of breed, and reflects a keen understanding of the business requirements most critical to the customers' success.