Alogent Sierra Xpedite Remote Deposit Capture and Transaction Processing

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1 Stessa B Cohen Product Report 20 August 2003 Alogent Sierra Xpedite Remote Deposit Capture and Transaction Processing Summary Alogent s Sierra Xpedite reduces check-processing time and costs through remote deposit capture. Financial institutions seeking enhanced processing efficiencies should consider this solution. Table of Contents Overview Analysis Pricing Competitors Strengths Limitations Recommended Gartner Research Insight List Of Tables Table 1: Technical Requirements: Alogent Sierra Xpedite Table 2: Features and Functions: Alogent Sierra Xpedite List Of Figures Figure 1: Xpedite, Sierra Xchange and Sierra Clearing Integration Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 Corporate Headquarters Alogent Corporation 4005 Windward Plaza, Second Floor Alpharetta, GA 30005, U.S.A. Tel: Fax: Internet: Overview Alogent Sierra Xpedite (Xpedite) extends check image and data capture and part of the processing validation and balancing to remote customer touchpoints, such as the branch. When implemented with Alogent s Sierra Xchange (Xchange) for transaction quality analysis and check and payment processing, Xpedite gives banks the potential to perform real time check and transaction processing. With the passage of Check Truncation Act of 2003 (Check 21) by the U.S. Senate, this solution can be used to capture both on-us as well as transit items. Table 1: Technical Requirements: Alogent Sierra Xpedite Current Version 4.1, released June Operating Systems Microsoft Windows NT 4.0, Messaging and Middleware Common Object Model (COM)/Distributed Common Object Model (DCOM), Extensible Markup Language (XML), Microsoft Message Queuing (MSMQ), IBM MQSeries. Network Protocols TCP/IP for internal LAN communications and Internet transmissions. Platform Microsoft Distributed internet Applications (Windows DNA). Web Server and Microsoft Internet Information System (IIS), Internet Explorer 5 (IE 5+). Browser Data and Image Capture Imaging Multiple branch and magnetic ink character recognition (MICR) capture devices: Seac Banche, Epson and Digital Check. Joint Photographic Experts Group (JPEG), Tag Image File Format (TIFF) and industry-standard image compression algorithms, Comite Consultatif International Telegraphique et Telephonique (CCITT) G4 (T.6). Other imaging options also available. Table 2: Features and Functions: Alogent Sierra Xpedite Data and Image Capture XCapture Collects MICR and images from branch and teller capture devices. Enables Web-based data entry associated with branch-captured transactions. Data and Image Output and Transmission XPortal XPublisher Supports Web-based access to data and reports. Generates event-driven and on-demand reports. 20 August

3 Table 2: Features and Functions: Alogent Sierra Xpedite Data and Image Capture System Administration XConfig Optional Applications Sierra Xchange Sierra Clearing Provides configuration application for user definition of business rules for sort patterns, validation, balancing and user customizations. Able to publish data and reports based on configurable events. When implemented with Xpedite, Sierra Xchange provides balancing, reconciliation and encoding of deposit items. Collector collects XML data and images from all of the branches and funnels them into an Structured Query Language (SQL) database. Sierra Xchange shares a common technology foundation with Sierra Clearing. Technical requirements: Windows NT and MS SQL Server. Provides applications for image-based check processing, including remote deposit items: Prime (prime pass processing) Reject Repair Balancing Supports image proof of deposit (POD), image reject reentry, pre-encoded and inclearing, as well as other workflows and types that can be configured through the application. Integrates with legacy IBM Check Processing Control System (CPCS), High Performance Transaction System (HPTS), Unisys Item Processing Systems (IPS) and Image Check Processing System (ICPS) systems. Analysis Xpedite captures deposit information from remote locations, validates and balances transactions, and manages the delivery of transactions to the back-office processing organization. To do this, Xpedite uses desktop and teller-side image-capture devices and Internet technology that delivers transaction images and data to back-office processing operations. The remote deposit capture and imaging capability of Xpedite can be fully exploited when it is integrated with Xchange and Sierra Clearing, enabling the bank to make fundamental changes in its image-based check processing. Xpedite is deployed at Barclays Bank (over 700 branches) and at Lloyds TSB, which also uses Sierra Clearing, Alogent s centralized check processing and clearing product. The Lloyds TSB implementation includes 2,200 branches that have installed over 500 countertop devices for image capture. In the U.S., World Savings has begun implementation of Xpedite at its 270 branches. Alogent markets Sierra Xpedite primarily to U.S. banks, as a product distinct from its Sierra Clearing image-based processing suite of applications. This distinction marks Alogent s move from a focus on centralized check processing toward distributed remote capture and payment/deposit processing. Architecture and Components The Xpedite server platform is based on the MS Windows NT/2000, Microsoft DNA and MS IIS architecture. Message movement between the branch and Sierra Xchange uses the XML data format and IBM MQSeries. Using XML, COM and DCOM, the financial institution can create application programming interfaces (APIs) to interface Xpedite with fraud detection systems, automated clearinghouse (ACH) 20 August

4 conversion systems, teller systems and image archives. Payment conversion and routing can be implemented with Alogent s Sierra Xchange solution. The bank can customize Xpedite messages, forms and reports. XML formatting enables the financial institution to merge check payment data with other payment data, whether for customer or internal presentation, research or analysis. Business Rules By creating business rules specific to their processes and environment for any aspect of the application, the financial institution can further customize Xpedite for their workflow. Rules are configured, deployed and managed from a central business rules application. The organization can configure business rules to determine where transaction capture, balancing and proving are done and how it is accomplished. Workflow Between Remote Capture and Centralized Processing By using Xchange, the financial institution can integrate Xpedite with Sierra Clearing or its established back-office check-processing operation. Xpedite wraps transaction data and images in XML format to deliver an XML export from remote capture locations to Xchange via a secure intranet connection. Branch deposit data wrapped in XML format could also be exported to the teller system. Transaction data and images that are delivered to the back-office operations site are balanced and reconciled on the central processing platform. Xchange serves as the gateway to manage data and images from branches as well as other points, such as cash vaults and automated teller machines (ATM). Figure 1: Xpedite, Sierra Xchange and Sierra Clearing Integration Implementation and Support Alogent provides professional services and project management throughout the implementation process to capture business requirements, processes, rules and specific regulatory issues and to bring the system 20 August

5 into real-time production. Project management services include managers certified by the Project Management Institute, quality checks and scheduling control. Pricing Pricing for Xpedite includes a base license fee spread over an initial five-year term, recurring annual maintenance charges and services revenue for customization and training. License fees are based on the transaction volume capacity of the system with per-click (transaction-based) license fees for electronic payments. Financial institutions can obtain volume discounts. GSA Pricing There is none at present, but Alogent is willing to discuss GSA pricing. Competitors Advanced Financial Solutions Branch Capture for ImageVision Advanced Financial Solutions (AFS) Branch Capture for ImageVision, an optional module, works with AFS s ImageVision ImagePOD. Check images and data are captured in the back office using the Unisys SourceNDP desktop or Digital Check TS-400. Branch Capture transmits check images from the branch to a back-office Image POD application. Like Xpedite, Branch Capture runs in the Windows NT/2000 environment. AFS introduced the capability to perform branch image capture in NCR ImageMark Branch Back Office NCR ImageMark POD provides image capture and POD processing and integrates with ImageMark Archive for archive and delivery solutions. ImageMark POD includes an option for branch image capture and for ATM check data and image capture. ImageMark Branch Back Office captures deposit information on Digital Check transports. The images and data are transmitted immediately to the transaction system, where it becomes part of the ImageMark Capture workflow. This integration enables the back office operations to prove and balance the items before the physical paper arrives. Branch operation workflow is not changed to implement this capability. ImageMark Capture can also be integrated with the Carreker Branch Truncation Manager process to act as the power encode back-end. By using MICR swipe devices integrated with any teller application, ImageMark Capture can also receive balanced deposit information captured by the scanner swipe or input by the teller. When the physical items arrive for processing, ImageMark Capture matches and power encodes/sorts the deposits for clearing. ImageMark can also incorporate data from ATM check deposits in two ways: check image and data capture, and ATM envelope data reconciliation. Both methods enable the bank to incorporate the data into the POD processing workflow. Unisys Branch Image Capture Unisys Branch Image Capture captures check and deposit data and images at the branch operation and transmits to the Check Processing system. The implementation of Branch Image Capture requires Check Processing and a Unisys Source NDP tabletop transport at each branch and a wide-area network infrastructure. The Unisys server is configured with Distribution Manager software at the branches and processing site. Micr8000 is installed on the server for CPCS emulation. Wausau Financial Systems Optima 3 Branch Capture 20 August

6 Wausau Financial Systems Optima 3 has Branch Capture, an optional module. The bank can implement back-office branch image capture on desktop transports. Each branch can be configured for up to eight Unisys SourceNDP desktop transports. Branch Capture is used to capture check images at the branch and transmit them to the Image POD application. Each branch must have a server with Branch Capture software installed to process and transmit images to an Optima 3 processing site. Optima 3 also facilitates electronic check processing (ECP) with the Electronic Check Handling module. This optional module enables a processing site to receive, process and send electronic data to and from a variety of sources, including CD-ROM or network connection, such as the Internet or FEDline. For ECP, processing operations can import and export check information in the Common Output Format (COF), the Federal Reserve ECP specification. Strengths Experience With Check Truncation, ECP and Branch Image Capture As Check 21 moves closer to passage in the U.S. Congress, financial institutions will look for ways to deploy check image processing and to capture images and data closer to the point of deposit. Alogent brings experience in check image and data exchange as well as remote capture. As a standard practice in the U.K., financial institutions exchange check data via image (Interbank and Data Exchange [IBDE]). In addition, while many vendors, including Alogent, offer branch image capture, fewer financial institutions in the U.S. have implemented it in their branch networks. Alogent can, however, point to implementations at both U.K and U.S. financial institutions. Remote Capture Solution Configuration Flexibility Xpedite may be used as a stand-alone product for front-counter and back-counter distributed imagecapture applications or with Alogent s Sierra Xchange payments gateway solution and Sierra Clearing, its check-processing solution. In the branch, Xpedite can be used for teller and commercial (mid- or backcounter) transactions and can be configured in the following ways: Stand-alone application at the front counter for customer-facing point of payment for teller, payment window and check cashing. Stand-alone application at the back counter for commercial teller and bulk remittance. Both front- and back-counter check and item image capture for branch-to-central payment processing. Point of deposit for customer touchpoints such as ATM and mail-in deposits. Consumer payments. Xpedite can also be used outside of the branch for payments processing. In its stand-alone front-office configuration, Sierra Xpedite can process payments as a retail lockbox implementation for corporate customers and other banks. The flexibility of configuration enables the branch to configure multiple tellers to capture images and data on a single capture device. Each workstation controls a single capture device. Xpedite supports a variety of devices at the teller, including Digital Check TellerScan 200 and 400, Epson, the Panini MyVisionX, Seac RDS3000 and 6000, and Unisys Source NDP. Xpedite has integrated A2IA CheckReader software with handwriting recognition on image-capable devices. This capability facilitates Courtesy Amount Recognition (CAR), Legal Amount Recognition (LAR) and Intelligent Character Recognition (ICR) for any field on the document. Operational Efficiencies 20 August

7 Xpedite facilitates check-processing operational efficiencies in several ways: Early processing and posting During implementation, the financial institution determines the business rules that govern the automatic transmission of data and images during the day to the centralized processing site. The bank can post transactions processed at the front counter teller window in real time. Bulk transactions captured at the back counter can be transmitted to a central operation site This functionality enables the processing site to begin POD balancing and data entry activities during the day. The bank can also set up rules for posting transactions during the daytime before paper checks are delivered. Reduce processing costs When Xpedite is implemented with Xchange, the central processing site no longer relies on the paper check to perform proof, data entry (as required) and balancing. These tasks can be performed at the point of capture at the branch. When the paper arrives, Sierra Xchange automatically reconciles the paper and encodes checks. One of the chief benefits is that the financial institution may reduce its transportation costs for picking up paper checks throughout the day. Banks may be able to have a single pickup at the end of the day. In addition, Xpedite supports full to partial truncation of on-us paper items. Reduce re-entry and repairs Validation and balancing at the branch can reduce the number of rejected items at the processing site. This reduction in turn results in faster processing and earlier presentment. Eliminate the check encoding second pass When Xpedite is implemented with Sierra Xchange and Sierra Clearing, the financial institution can eliminate manual check proof and encoding, a process that adds processing time by validating data before merging it with paper. The bank can then eliminate data entry and balancing at the processing site. Branch operational effort Xpedite does not require additional control documents to process checks at the branch. A front-counter teller implementation eliminates the tellers task of preparing internal documents. Alogent has minimized the impact of system implementation and maintenance by deploying the application over the Web. This benefits the bank by minimizing the operational impact on branch staff of branch image capture. High-Volume Processing To appeal to large financial institutions, a successful branch image-capture application must be able to handle the high volume of images and data from hundreds of branches. With implementations completed at Lloyds TSB, Barclays and under way at World Savings in the U.S., Xpedite is proving its ability to handle high-volume branch image capture and processing. The actual capacity for a given financial institution will likely be dictated by bandwidth availability and costs. Rules-Based Automated Processing and Transmissions Xpedite exploits business rules to extend the automation of both the branch image-capture process and check processing. For example, the financial institution works during implementation to set up business rules that determine transaction capture, balancing and proving. These rules determine where these tasks are done and how. In addition, the financial institution establishes business rules in Xpedite that govern the automatic transmission of data and images during the day to the centralized processing site. These rules can enable the processing site to begin POD balancing and data entry activities during the day. The bank can also set up rules for posting transactions during the daytime, before paper checks are delivered. The advantage of this capability is that the financial institutions can add volume without increasing staff or, possibly, transport hardware. Automation of data transmission from the branches frees the branch staff 20 August

8 from additional monitoring of the branch image-capture system and eliminates processing problems if data is not transmitted on time. Limitations Established Legacy Vendors Through its implementations for Lloyds TSB, Barclays, HSBC and Intelligent Processing Solutions Limited (ipsl) in the U.K., Alogent has established a solid base in the U.K. In the U.S., Xpedite competes with branch image-capture products from established vendors in the check processing market, such as Unisys and NCR, Advanced Financial Systems and Wausau Financial Systems. All of these vendors have an established installed base in the U.S. Alogent This challenge is diminishing as Alogent gains U.S. customers for all of its products generally, and particularly for Xpedite with the addition of World Savings. Another mitigating factor is the unique ability of Xpedite to change the bank s processing workflow and enable remote validation and balancing before the paper arrives at the processing operation site. Branch Process Changes Introducing image capture requires a certain amount of branch staff training. While the capture devices are not difficult to operate, the bank will not only have to train tellers in operation and maintenance of devices, but also manage the change in teller job duties. Alogent s support of both customer-facing and back-counter capture devices may mean training employees on at least one device. The ongoing impact of branch image capture and processing efficiencies will typically offset additional training requirements. Internet Bandwidth and Remote Image and Data Capture Providing image capture of check data at the point of presentment (for example, at the bank branch office) makes check processing more efficient. Implementation, however, requires sufficient network infrastructure within the branch and bandwidth between the branch offices and the operations site to transmit the data and images. The bank must deploy a secure intranet connection that provides a sufficient level of network, data and message security for the check images and data. In addition, the bank must measure the cost of connectivity against the advantage of earlier processing of the check data and the opportunity to provide earlier presentment of exception items to its customers. Also, banks are finding that other business requirements, such as integration with enterprise customer relationship management (CRM) applications, are pressing the need to renew and upgrade branch networks. Recommended Gartner Research Advanced Financial Solutions ImageVision Check/Transaction Processing, DPRO Alogent Sierra Clearing for Check and Transaction Processing, DPRO Check 21 Bill Clears U.S. Senate, but Consumer Concerns Remain, FT Check 21 Bill Is E-Processing Call to Action for U.S. Banks, QA Check/Item Processing Transports: Comparison Columns, DPRO NCR ImageMark Archive, DPRO NCR ImageMark Check Capture for Image Processing, DPRO New Technologies Drive Improved Check Processing, COM Retail Branch Automation Technology: Perspective, DPRO August

9 RTE Check Processing: A New Approach for an Old Process, T Single Standard for Exchanging Check MICR Data Coming, TG U.S. Federal Reserve Gives Another Reason to Move to Check Imaging, FT Unisys Check Processing, DPRO Unisys Payment Archive, DPRO U.S. Banks Should Prepare for Check 21, FT Wausau Financial Systems Optima3 Check Image Processing and Archive DPRO Insight Alogent offers not only a remote capture for branch image capture, but also the opportunity to take check processing closer to real time. Check processing can start sooner, as soon as the item is captured, match more items automatically, reduce exceptions and eliminate the need for additional passes for check encoding. Because Sierra Xpedite can be implemented with a variety of back-end processing systems and transports, it is suitable for large as well as smaller financial institutions with an investment in legacy systems, whether or not the banks have Sierra Clearing. Financial institutions considering check truncation, adding branch or remote image capture, searching for ways to increase operational efficiencies or replacing check-processing systems will want to investigate Sierra Xpedite. 20 August