In response, AFS announced today the availability of its Deposit Analysis Service, a component of the company's more comprehensive Treasury Risk Workstation (TRW), an ASP that offers multiple delivery alternatives to support informed decision making to enhance performance, reduce expenses and mitigate risks inherent in payment system changes.

"Banks are very efficient in processing paper payments," said John Shain, president of AFS. "But Check 21 means that banks will have two major item processing systems to support: image and paper. There will be a period of several years where banks are using a combination of check clearing processes. This is an evolutionary change, with image systems actually driving up unit costs at a time when banks are looking to maintain profit and reduce risk."

According to AFS, banks have periodically done incremental analysis to determine how they should clear checks and made adjustments to such things as transportation, clearing agent selection and sort patterns. Now, banks will have to make the more strategic determinations of how to invest in payments infrastructure, whether and at what pace to deconstruct paper operations support, where to locate processing sites, which new partners with which to align to conduct image exchange, produce Image Replacement Documents (IRDs) and more. Adding to the complexity is how the Federal Reserve's pricing and operations changes will impact a bank's decisions on clearing. According to a recent article in American Banker, the Federal Reserve will close nine check-clearing centers in 2005 and 2006. "And it may consider closing more sites as check volume continues to slide," said Mr. Patrick K. Barron, the first vice president of the Federal Reserve Bank of Atlanta. (August 6, 2004).

"Bankers face two major decision processes: 1) How can I clear items cost efficiently and 2) How do I set pricing for customers to be profitable," said Ned Miltko, AFS Director of Payments Product Management. "These analyses are tremendously more complicated and dynamic under Check 21. The number of variables that has come into play has grown exponentially, as bankers try to evaluate the tradeoffs between image, Image Replacement Documents (IRDs), ECP, ARC, paper, and the deadlines, price points, settlement options, and scope of new service offerings by existing and previously unknown entrants to the payments services market.

"The value of the Deposit Analysis Service is that it provides ongoing modeling and analytic capability to evaluate an overwhelming number of options introduced daily to address the trade-off between the deconstruction of a high operating cost paper-based processing environment and the capital investment required to achieve lower cost electronic alternatives," said Miltko. With an ASP approach, AFS takes responsibility for building and maintaining the Deposit Analysis Service database, integrating client information from multiple source systems as applicable: CIF, DDA, account analysis, float and check processing systems to provide the decision support capabilities financial institutions require to continually re-set their baseline costs.