Cheque processing: From 5 hrs to 60 sec

CASE STUDY

India's banking sector faces many roadblocks as it is largely paper-based. However, information technology (IT) is helping banks hasten up the process. India has around 175 scheduled commercial banks with around 70,000 branches.

Billions of cheques are processed annually. Around 1.4 billion cheque transactions, for instance, took place in 2006. The problem, however, is that nearly 90 per cent of these cheques are processed manually (largely paper-based). This poses a huge problem of cash management for companies.

The Real Time Gross Settlement (RTGS) "" which is an online system for settling transactions of financial institutions, especially banks "" is the the fastest possible money transfer mechanism in the banking channel.

However, it is primarily for large value transactions, the minimum amount to be remitted being Rs 100,000. What about smaller value transactions?

Deutsche Bank, with the help of IT, appears to have found a solution in India. Till a couple of months back, there was a five-hour gap between the time the cheque was picked up from the customer and deposited at Deutsche Bank. The process was tedious, explains Wolfgang Gaertner, managing director and CIO, personal and corporate banking, Deutsche Bank.

Cheques would first be picked up from 9 AM onwards. Local cheques would then be deposited with partner banks. The service provider would consolidate the information, and then transfer it by email or fax to Deutsche Bank from 2 PM onwards.

Customers, however, would get to view the transaction only the next day. Cheque returns account for nearly 5 per cent of all cheques. But there's no system to track these, which results in a lot of heartburn for the customer, notes Kaushik Shaparia, head, Global Transaction Banking, Deutsche Bank, adding that "the data processing too was manual".

"Operational excellence for us means delighting our customers. For this, we needed to innovate and hasten up the transaction time," says Gaertner. With the understanding that "information is the key", the bank came up with a novel idea: Field Force Express. With the help of a handheld device, a user's (customer) credentials are authenticated in real-time with a central server.

There are two modules "" deposit entry and cheque return. The bank's agent makes the data entry on the handheld; keys in the number of the cheque and its value. The innovation here, notes Shaparia, is that an image of the deposit slip is captured for online transmission.

The customer then gives a digital acknowledgement which is used for data processing. The proof of the online transmission can be seen on the web server. "The entire process", asserts Shaparia, "is completed in 60 seconds".

Deutsche Bank is also seeing a major opportunity in smaller towns as telecom operators ask banks to collect cheques/cash and match the collection against the billing files for a specific circle, notes Shaparia.

"There are hundreds of drop boxes. Telcos need to collect and account for the payments on that very day." To resolve the issue, the Bank has introduced the 'Payer ID' fully-automated solution which it has used to good affect with other clients too.

For instance, GlaxoSmithKline Consumer Healthcare Limited (GSKCH), earlier addressed collections from payment parties with demand drafts "" a predominantly paper-based system.

The Payer ID solution now facilitates direct remittance of funds to GSKCH's account using the Reserve Bank of India's RTGS (Real Time Gross Settlement) or NEFT (National Electronic Funds Transfer).

Each payment party is assigned a unique Payer ID which enables identification of remittances made, thereby allowing GSKCH to reconcile it against the payer identification information before dispatching the goods to the payment parties.

Hence, the solution significantly brings down the turnaround time for dispatch of goods and improves the efficiencies across the value chain, a fact endorsed by Gautam Chakraborty, director, Finance & IT at GSKCH. GSKCH's wholesalers and managers are also benefiting from Deutsche Bank's collection solution. Several wholesalers in prominent towns now receive their stock within 24 hours of payment.

Deutsche Bank, of course, does not intend stopping here. Gaertner concludes: "Our solutions could reduce paper usage by around 25 per cent. Moreover, the transaction time is reduced. And there are fewer chances of committing an error. India is a very important processing hub for us, and we are continually trying to improve our processes with the help of Six Sigma."