Cheque Truncation
IBM Business Consulting Services
Indian Cheque
Truncation Initiative
Key challenges for Indian Banks
Ravi Trivedy
IBM Business Consulting Services
deeper deeper © Copyright IBM Corporation 2003
IBM Business Consulting Services
The Indian Cheque Scenario – an IBM Point-of-View
Cheque volumes will continue to increase for the next
5-7 years - All parties involved have strong reasons to continue to promote check usage
Banks - significant revenue flows are tied to the use of checks
Slow consumer adoption of electronic payments - cheques are free + Perception of safety
Merchants, Corporates, Governments, and Non Banking
Financial Institutions - due to lack of cheap, convenient alternatives and because many accounts payable and receivable systems are designed around checks.
© Copyright IBM Corporation 2003
IBM Business Consulting Services
Image based processing of cheques in India present several challenges – which all add up to the cost for the banking industry
Geographical spread & volumes impact speed of physical movement of paper (specially inter-city)
Multiple languages & scripts
Multiple handling due to current processes in branches – high rejects in an imaging process
Legal & Regulatory issues
Lack of Centralized Banking systems in many banks to enable STP
Potential for fraud/counterfeit cheques increases
© Copyright IBM Corporation 2003
IBM Business Consulting Services
The Truncation initiative will have a major impact on Payment
Operations – some key recommendations
Indian Model - Truncation at presenting Bank
Big Bang approach – mandatory cutover for ALL Branches
Each Bank to decide it’s own model – Truncation at Branch or
Service Branch or Outsourced
Recommendations for Banks
Understand volumes, current operations
Develop strategy & optimized operations architecture in a truncation environment
Define new processes (focus on mitigating operational risk)
Re-define clearing operations
Indian Cheque
Truncation Initiative
Key challenges for Indian Banks
Ravi Trivedy
IBM Business Consulting Services
deeper deeper © Copyright IBM Corporation 2003
IBM Business Consulting Services
The Indian Cheque Scenario – an IBM Point-of-View
Cheque volumes will continue to increase for the next
5-7 years - All parties involved have strong reasons to continue to promote check usage
Banks - significant revenue flows are tied to the use of checks
Slow consumer adoption of electronic payments - cheques are free + Perception of safety
Merchants, Corporates, Governments, and Non Banking
Financial Institutions - due to lack of cheap, convenient alternatives and because many accounts payable and receivable systems are designed around checks.
© Copyright IBM Corporation 2003
IBM Business Consulting Services
Image based processing of cheques in India present several challenges – which all add up to the cost for the banking industry
Geographical spread & volumes impact speed of physical movement of paper (specially inter-city)
Multiple languages & scripts
Multiple handling due to current processes in branches – high rejects in an imaging process
Legal & Regulatory issues
Lack of Centralized Banking systems in many banks to enable STP
Potential for fraud/counterfeit cheques increases
© Copyright IBM Corporation 2003
IBM Business Consulting Services
The Truncation initiative will have a major impact on Payment
Operations – some key recommendations
Indian Model - Truncation at presenting Bank
Big Bang approach – mandatory cutover for ALL Branches
Each Bank to decide it’s own model – Truncation at Branch or
Service Branch or Outsourced
Recommendations for Banks
Understand volumes, current operations
Develop strategy & optimized operations architecture in a truncation environment
Define new processes (focus on mitigating operational risk)
Re-define clearing operations