Financial institutions have been investing heavily in check image processing and expect to reap significant cost reductions when the migration to electronic clearing is mature. However, there is a transition period, likely to last another three to five years, during which the paper-related infrastructure costs must be aggressively eliminated to offset the new image investments. Attentive float management can fill the gap, now that changes like Check 21, new image technologies, and rising interest rates have created a dynamic float management environment. But many institutions are resource- constrained in float management, having downsized due to declining check volumes and years of low interest rates.

Carreker's float rightsourcing service allows clients to outsource selected aspects of their float management function. They partner with Carreker to provide current volume and cost information about their transactions, and Carreker's float experts analyze the information to determine optimal electronic and paper check collection patterns. They can identify opportunities to reduce transportation networks, equipment, people and to quantify the impacts of alternative processing scenarios. They have the technology to easily maintain the banks' sort patterns, cash letter system, and float pricing system tables, and the expertise to augment the banks' float management resources.

Suzette Massie, president of Carreker's Global Payments Consulting (GPC), said, "It's a perfect storm of an opportunity for our clients. They are seeing rising interest rates inflate float costs and revenues, paper-based revenues declining faster than electronic fees can pick up the slack, image- driven changes in collection patterns, and steady pressure to get paper costs down without diminishing service. All this while the ranks of float managers have been thinned by years of low rates and declining checks. It's a situation that fairly begs for assiduous attention, the latest in technology, and the deepest expertise - precisely when banks are unlikely to have the resources."

Bill Duffy, managing principal, GPC, said, "It doesn't take long to justify outsourcing, if your resources are strained when float's opportunity value is climbing. Because we had the resources to analyze one client's processing locations on a monthly rather than annual basis, they realized several million dollars in immediate float opportunity. For another, we were able to determine that implementing remote deposit capture could reduce internal float by more than $100 million a day. There's a pure lost opportunity cost if scarce resources keep you from making these discoveries. We can help our clients accelerate their cost take-downs in paper processing to keep up with their ramp-up in spending on image."

He added, "Like a lot of valuable outsourcing practices, we consider this more of a rightsourcing relationship - a partnership. After all, our clients still retain the customer relationships, they all have their own strategies for managing the payment electronification transition, and we look to them to implement the changes our analysis produces. But there's an evident need for the expertise, technology, and focus we can add."

J. D. (Denny) Carreker, chairman and chief executive officer, Carreker Corporation, said, "Float outsourcing is a prime example of the new product/service innovation our company has invested in - new offerings that convert our legacy expertise into new value to help our clients manage the payments transition."