P ACE Savings & Cre d i t

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2 Distributed Capture and WEB-Enabled Integrated Check Imaging Provides Improved Services at Less Cost Pace Credit Union becomes a services and technology leader. By Cliff Copeland, President Contact Innovations P ACE Savings & Cre d i t Union, (Mississauga, Ontario, Canada assets of C$100m and 5 branches) turned to Contact Innovations Inc. (Toronto, Ont.) to provide desktop check imaging solutions linked to Internet services to improve their customer services and lower their costs. Pace provides Retail and C o m m e rcial Banking serv i c e s including savings and deposit accounts, check pro c e s s i n g, loans and personal financial services to commercial and residential members in the province of Ontario at its branches; from home via the Internet; via 24 hour telephone banking; through ATMs and shared ATMs; and by Direct Payment systems. Using Contact Innovations software, Pace has reduced its costs through: Less time spent in check sorting and statement preparation and rendering Reduced time and costs associated with searching and retrieval of checks Reduction in postal costs Reduction in time and costs of MICR encoding Faster responses to customer queries It also gained some intangibles, as now Pace s members can: Search and access images of their own checks through the Internet Communicate directly with the bank via Make payments and transfers from home over the Internet Get a complete statement with sorted images of the back and front of checks on easy-to-file letter-sized paper. P a ce ch os e C on t ac t Innovations Inc. after they were i n t roduced by their Intern e t Service Provider about 2 years ago, Tammy Courv o i s i e r, the Systems Data Administrator is enthusiastic, saying Contact Innovations customer support and service have been outstanding. The core applications delive red by Contact Innovations Inc. fall under the generic heading ImageArchive (IA) Check with WebView. The initial application module introduced gave Pace the ability to scan checks at the desktop and archive and retrieve them, providing Pace with improved operations and elimination of microfilm. This has been followed by statement management and check encoding. It all adds up to a total inhouse solution under Pace Credit Union s control they control their costs and launch new products. The delivery services can be provided directly by the Credit Union or sub-contracted. In this case, Pace decided to out-source the Internet services to HomeBank, a local I n t e rnet service provider and hosting service, and to outs o u rce the image-based statement mailing to Rolerdata, who they previously used. P a c e s head office in Mississauga runs ImageArchive Check with two Image/MICR

3 workstation scanners and softw a re for in-clearing (member statements and internet access) and teller (in-transit items) outgoing clearing and re t r i e v a l s. The other five networked branches each have a single t e l l e r-oriented Image/MICR scanner. All the workstations are connected to a central serv e r using Microsoft Wi n d o w s N T / Win2000 to access the Image Archive Check Repository system, which maintains both data and images (see diagram). Reduced Cost combines with Improved Customer Service Check scanning has helped to significantly reduce encoding costs to around Canadian 4-6 cents (US3-4 cents). Elimination of the back-office costs of sorting, filing and mailing checks each month allowed furt h e r staff savings, and there are now no microfilming costs as the images substitute for the microfilm. Check scanning also enhances Pace s ability to service its members with a speed that was not available before. Under the old paper intensive method, if a member asked for a check, the branch either had to record the request and ask the member to come back later, or ask the member to wait. If the checks had been stored on site during the month a search could take 15 minutes in the back office, but if the search involved older records that were stored off site it could take several days. Using images of the checks, these types of requests are satisfied in a few minutes even if the checks are several months old it is just a matter of loading a CD and making a few key-strokes. A c c o rding to Ta m m y C o u rv o i s i e r, a major saving combined with improved customer service was in the statement preparation and distribution. The savings are aro u n d C$1,000 (US$650) a month in labor alone based on two people spending 40 hours each matching checks to the statements. Pace found that the accuracy of electronically matching scanned checks to statements using check images has provided nearly 100% accuracy. The new system eliminates the two scenarios that sometimes occurred with hand-sorted checks: 1. Missing checks, which means that the count of images doesn t match with items on the statement 2. Wrong checks included with the statement Now with ImageArchive, any exceptions are caught and reported, and the supervisor is alerted to verify and determine the action to take. Compared with the old manual process it is faster and safer and now customers are guaranteed their statements by the 10th of the month instead of the 20th-23rd. Internet Banking In 2001 Pace implemented the ability to manage and control member s accounts through the I n t e rnet using Contact I n n o v a t i o n s Inc. s WEB Vi e w software, an API toolkit which lets the Credit Union use its ISP or own web designers to interface to the IA Check Archive repository. Members can retrieve an upto-date statement directly from their home PC over the Internet and view or print images of their canceled checks. This Internet banking solution allows Pace to add cross-selling personalized promotional messages to each member s statement. As at April 2002, 690 members have signed up for the Internet service which currently offers no charge history statements, transfers and bill payment and are accessing it about 10 times each per month. About 20% of all the online transactions are bill payments. But with the capability to separately identify and potentially charge for the payment method whether via Internet, Telephone or Over-the-counter; Pace expect this to increase as they will probably encourage its members to use on-line bill payments. Because the desktop check scanners installed by Contact Innovations scan both sides of the checks concurrently, members can view endorsements and other information or re c re a t e the check for audit purposes. There is a demo at with statements with associated images atwww. h o m e b a n k. n e t / demo/getstatements.html. Pace s Internet-based banking supports: Inquiry into Account Balances Account Statements with Check Images allowing the user to view images (front and back) of cancelled/cleared Checks On-line Transfers and Bill Payments Issuance of Stop Payments on Checks Investment Renewals Calculation of Loan Pay Outs Up to date Foreign Exchange Rates and a variety of financial calculator tools. The system also allows the member to the credit union rather than call in or use the telephone. Currently they get about 5-6 s a day with account inquiries which are answered by the tellers by the end of the day. It is quicker and easier than using the phone and allows Pace to utilize its staff more effectively. But this is just the first step towards more effective management of Pace s business using image based systems and the Internet. All members still receive a

4 paper statement as the interest and charging procedure is part of the statement production process, but in the future it is anticipated that some members will not want to receive the paper. This is borne out by pace s WEB statistics which show that the average on-line member is accessing his statement over the Internet about twice a week to verify transaction posting and inquire on his balance. Those members (app 80%) who receive their checks back with the statement get small printed images of their checks instead of the original paper. It works like this. Each month Pace runs Contact Innovation s Image Statement Merg e Software which merges the e- statement history file from a 3rd p a rty banking system vendor with CI s Image Archive Check Repository. This creates a complete member statement file with images of the member s checks that are transmitted via FTP over the Internet to R o l e rdata. Rolerd a t a ( w w w. ro l e r.com) is a leading p rovider of traditional mass printing and mailing services to Credit Unions in the US and Canada. Image Statement Merge saves postage, paper and envelope costs, and is a part of the improved, faster service to Pace members. On-Line Signature Verification By the fall of 2002, Contact Innovations will release an update that will add sign a t u re verification functionality to the IA Check module. This function will enable Pace to easily interf a c e and verify mem- Teller Scanner ber signatures while the check is being accepted at the teller workstation or randomly checked on in-clearing items. Tellers can Image Capture and MICR Encode Pace is now starting to implement CI s Image Archive Check Encode which enables tellers in the branches to MICR encode checks that have been scanned and balanced using IA check. ImageArchive Check Encode is being implemented for a number of reasons: Their existing encoders were large and needed replacing MICR quality was decreasing, causing higher reject rates Maintenance was increasing The older encoders were timeintensive, as the user had to hand feed and key in each item Adding Check Encode to Desktop Encoder the Image Archive system was a low cost alternative ($4,000 instead of a new $7,000 encoder) The process is simple: The teller launches the Image Archive Encode module and selects the completed scanned batch. Images of checks appear in scanned o rd e r. The teller or backo ffice operator places the checks in the feeder of the Encoder and presses the Enter key on the keyboard. As the check images are displayed on-screen, the operator confirms the check and clicks Enter; the checks are automatically MICR encoded with optional endorsement. The operator can then print a list of all checks in the batch and the supervisor can print a final summary list of all the batches with totals for the cash letter clearing deposit. Summary Using Contact Innovations Inc. and some external service providers, Pace has implemented a state-of-the-art image-based check management solution with Internet delivery, with minimal investment or staff. Pace was able to offer Internetbased services just 6 months after they began in January 2001 and was offering the service live to its members by August 2001 for ALL accounts. The service provider ( takes care of all the security and reliability issues on their servers with passwords, contro l l e d access, encryption and firewalls for data protection. It effectively isolates the Credit Union s computer system from possible I n t e rnet-based intrusion while allowing members to execute transactions via the Intern e t without a Web Server installed at each branch. Rolerd a t a ( w w w. ro l e r.com) provides the printing and mail serv i c e. Contact Innovations Inc. ( w w w.contactci.com), whose

5 WebView can work with any ISP or Host Internet Application, p rovides the innovation and expertise that makes it all work. As Jim Vasko, VP & CFO at Pace put it, the whole system helps lower our costs, increases our efficiency we have just 40 staff responsible for 8,500 members and it makes us a services and technology leader. Pace is currently the only Credit Union in Ontario offering all these services and the only Credit Union in Ontario to offer check imaging and account hist o ry and control over the Internet. As a result many Credit Unions visit and the others are looking and will soon follow. The Contact Innovations solution is a localized solution based on software tools that can be easily customized. The only other solution that has been implemented in Canada to date is a fee-based central solution resulting in the Credit Union losing flexibility and control. Pace Credit Union Jim Vasko Vice-President and CFO 201 City Centre Drive Mississauga, ON L5B 2T4 Canada jvasko@pacecu.com Assets: C$100m # Members: 10,000 # Full-time staff: 37 FOM Live or work in the region (municipality) of Peel About Contact Innovations Inc. Contact Innovations (CI). founded in 1994 was a pioneer in desktop PC-based check imaging solutions to replace traditional manual, labor intensive processes with automated workflow. C I s software applications for Credit Unions incorporate the latest in intelligent image, MICR and optical character recognition (OCR), image retrieval and routing, as well as mass-media storage and distribution. Installed in 25 Credit Unions in Canada and the US, these applications have helped to streamline mission critical processes, improve productivity, reduce loss and achieve significant savings in operating costs. Check Imaging can also have some peripheral benefits. For example, Cataract Savings and Credit Union Ltd. had a problem when a courier carrying checks was robbed. The original checks disappeared, but Cataract was able to recreate the checks f rom images within a couple of hours. The Contact Innovations solution literally saved us our courier d checks were lost and we needed to reproduce them. The IA check archive and retrieval system allowed us to recreate all of the checks for that day within a couple of hours says Jacki Good Collections and MSR Manager ( jackigood@cgocable.net). Customized Financial Solutions for Credit Unions Contact Innovations image-oriented solutions for the Credit Unions consists of a series of customizable software modules: IA Check, IA WebView, IA Check Encode and Image Statement Merge and Print. The ImageArchive Product Family is an easy-to-use, scaleable desktop or client/server imaging system, providing streamlined services for processing, archiving and retrieving financial documents. Image Archive is a cost-effective solution that saves time, reduces storage space, increases productivity, provides safe, long-lasting storage of vital data, and makes it quick and easy to find information. It makes fast, easy and affordable electronic document input, retrieval, management and storage a snap. Contact Innovations Inc. #3-153 Bridgeland Avenue Toronto, ON M6A2Y6 Canada 416/ x sales@contactci.com