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CheckImage Collaborative - image file format standard for US checks 5/30 AB Some standards are more standard than others. Payment executives had been working for 2 years to determine how to implement a new standard designed to unify how networks accept data files & beef up the information included in those files. But that effort has been scrapped, after participants concluded that the required changes, especially a new system for handling return items, would be too difficult to implement. They are opting to tighten the relatively flexible standard being used today. Phyllis Meyerson, Eccho, said interest in switching standards declined in the past few years as image networks became a common part of the industry’s check-clearing infrastructure & bankers became accustomed to using the current standard. ‘If we go there, we have to make massive changes, & we don’t want to make massive changes.’ The Fed announced that the CheckImage Collaborative had created a universal companion document, describing how to format cashletters so they can be sent to any of the image exchange networks. That group has come up with a 3rd standard, designed to formalize the changes incorporated by the universal companion document. The document is intended to smooth out the technical differences in exchange procedures mandated by the 4 major image-clearing systems: the Fed; SVPCo; Viewpointe; & Metavante’s Endpoint. All these networks use a check-image standard known as X9.37. In the rush to prepare for image exchange when Check-21took effect in 2004, the networks set up their systems to accept X9.37 cashletters configured in a slightly different manner. Each network has long had its own companion document explaining how to apply X9.37 to create image cashletters. Though the processes are similar, the differences are significant enough to require banks to use different procedures for submitting data to each network. Adopting the universal companion document is expected to eliminate this issue. When payment executives announced in 2006 that they had developed a successor to the X9.37 standard, they were trying to address the same issue. Brian Egan, FRB Atlanta, said the more bankers tried to determine how to implement the proposed successor format, known as X9.100-180, the more troublesome it looked. Making their systems conform with the newer format - which is often referred to by the industry shorthand ‘180’ - would have required ‘significant retooling by banks of every size, & there wasn’t a business case to do it.’ Standard-setting is a time-consuming process, & ‘180 got caught in the implementation of Check-21. By the time it got off-ballot & approved, Check-21 had been implemented, & the industry was moving forward,’ using the X9-37 format. Andy Garner, Wachovia, who was involved in the effort to determine how to move banks to the new standard, said return codes were the ‘nail in the coffin’ for the 100-180 format. The new standard called for a 2-digit return code, providing banks 100 options for explaining why a check image had been sent back to the depositing bank; the current standard uses only a 1-digit code. The shift from a 1-digit code to a 2-digit code would of course have required all systems to be updated, but that wasn’t the only consideration that weighed on those negotiating the new standard. Garner said there were some vigorous debates over the issue, as bankers went back & forth over how much detail was necessary to explain why a check had to be returned. In the end the decision to abandon the debate, & the new standard, was based on a single, pragmatic consideration: ‘It would take ages to retrofit the systems for the 2-digit return codes.’ When it became apparent that the new standard would cause more problems than it would solve, Eccho & the Fed convened a group of banks, vendors, clearing systems & other organizations, to come up with an alternative. That group, CheckImage Collaborative, came up with the universal companion document. The group has coordinated its efforts with Accredited Standards Committee X9, the standard-setting forum for the financial industry, to define another standard that would align with X9.37. That work led to a 3rd standard, X9.100-187, which is out for ballot now. George Thomas, Radix Consulting & an early critic of X9.100-180, said the decision to abandon that standard makes sense for the industry. ‘Look at the work that has been done to get to where we are today with the 9.37 standard. Why put everybody to the expense to convert to a new standard when you’ve got one that’s working?’ The CheckImage Collaborative said it could take 12 - 18 months for financial institutions & vendors to implement the universal companion document. Garner said the document will provide banks & vendors with a road map while X9.100-187 works its way through the balloting process & eventual adoption by ANSI. The industry is stuck in something of a standards limbo, because the X9.37 standard was never designed to be the last word in image exchange. Instead, it was a ‘draft standard for trial use,’ & officially it no longer exists; it was retired in 11/06, after X9.100-180 was formally approved. ‘180 is the standard, but nobody is using it,’ Garner said. By creating a universal companion document & developing the newest standard, financial companies will ‘have a valid standard that is compatible with what we’re actually doing.’