Innovation in Unlikely Places

BAI Payments Connect event this past week in Phoenix wasn’t exactly a hotbed of innovation in my opinion. Not surprising perhaps, when so much collective industry activity needs to be spent on compliance these days. In fact, one mid-tier bank asserted publically that 30% of its IT budget in 2010 addresses compliance directives. A sad reality in my opinion. But, innovation wasn’t absent at the event. It did show up in some unlikely places, however. Here are two innovations I observed. A common element in both is that they have to do with paper. When all the action is on the imaging and electronic side of payments, these two innovations deserve recognition for the value they provide to those having to deal with residual paper. Block & Company: helping RDC clients protect checks post-imaging. Most everyone is familiar with the FFIEC Guidance on RDC Risk Management. This too little too late guidance has spawned extraordinary industry-wide effort with the objective of reducing RDC risk mechanisms. Page 4 of the document addresses operational risk at customer locations. In particular, financial institutions are challenged to ensure customers properly safeguard original items once scanned and deposited. This is a tough one, because customers will do what they do, with little ability for financial institutions to impose procedural changes upon them. Block & Company invented a device to address the risk associated with multiple presentment and inadvertent disclosure of sensitive information from original items. The RDCheckTrack by NKL®, Paper Check Storage Device provides a secure way for RDC customers to temporarily store deposited items prior to destruction. The device provides storage capacity of about 2,400 checks held between three internal bins. A laptop-style cable lock keeps the unit in place, and an outside timer tracks the client prescribed time period for holding checks and prompts when destroying is required. Not exactly game changing, but a very practical benefit to financial institutions and customers alike. In my opinion, these ought to be offered to all new and existing commercial RDC clients. [caption id="attachment_2082" align="aligncenter" width="500" caption="A Solution to Original Item Storage for Commercial RDC"][/caption] Everyone hates IRDs, but Liberty Processing & Services Innovation, LLC (LPSI) is focused on taking away as much of the pain and cost of IRD production and clearing as possible. Earlier this week, LPSI announced the launch of services to more efficiently print and distribute substitute checks for financial institutions. LPSI has joined forces with United Parcel Service (UPS) and a top tier bank to bring aggregator services, convenient settlement, advanced logistics and timely delivery to financial institutions nationwide. LPSI offers same day, and deferred services to endpoints in all states for both forward presentment, as well as returned items. The innovation here is a logistical one – teaming up with a transportation logistics pro – UPS, with operations in Louisville, Kentucky, a stone’s throw away from the UPS air transportation hub. Celent understands that LPSI pricing and lead times will challenge the Federal Reserves FedImage Services. Perhaps with its logistics superiority, LPSI is well positioned to be the last man standing as IRD volumes continue their decline.