Currently being piloted under the aegis of the National Automated Clearing House Association (NACHA), the programme lets lockbox providers convert cheques into Automated Clearing House entries.

Meridien projects that as a result electronic-cheque volume will start to climb rapidly beginning in late 2002.

Financial institutions haven't been able to wean American consumers from writing billions of paper cheques, which they use far more often than citizens of other industrialised countries. Despite predictions of the demise of the paper cheque, volume has not diminished. Recent statisticis from the Bank Administration Institute indicate that in the past two years paper cheque volumes in the US rose from 66 billion to 68 billion. The BAI has been encouraging banks to move to electronic cheque presentment (ECP) as an interim step towards full dematerialisation, but the larger US banks have struggled to integrate ECP with their internal systems.

"With cheque 'electronification' you don't have to change consumer behavior. Billers get the benefit of more streamlined processing and better collections," says the author, Meridien Research senior analyst Jeanne Capachin. "This service will be essential for financial institutions providing lockbox services because billers will demand it. The effort to electronify cheques is relatively minor, and several technology vendors are preparing to offer this service to US banks."

An additional benefit of turning paper cheques into electronic data entries is that lockbox providers will be able to destroy processed cheques, for substantial savings in warehousing and exception-processing costs, she says.

The report includes a case study of Aid Association for Lutherans, a Fortune 500 organisation participating in the pilot, and covers key items to watch in the future, such as the proposed federal Cheque Truncation Act, Nacha rule changes, fraud detection and biller demand.