Summary of 2008-1 Check Clearing Study
Clearing Times Shrink, But Less Rapidly

The 2008-1 Clearing Study, conducted in March, recorded the impact of increasing image presentment as clearing averages fell once again. However, in an interesting development, the amount of clearing reduction was less in every category (city point, RCPC point for both lockbox and over-the-counter deposits). The study utilizes both lockbox deposits of larger dollar items that measure “aggressive” check clearing patterns and teller, or so-called “over-the-counter” (OTC), deposits of smaller dollar items that measure less costly clearing patterns. The study expectation had been for the rate of RCPC clearing time decrease to exceed that for city points. The thought process was that banks were being slow and cautious in opening their controlled points to image presentment and that this study would reflect a growing opening of these points.

For OTC deposits, the expectations materialized partially. The average city point clearing time leveled while the RCPC point average fell - faster than the city point average, but not faster than in the previous survey. For lockbox deposits, the city point average fell slightly more than the RCPC point average, and the RCPC point average declined less sharply than in the previous survey. Thus, the difference between city point and RCPC point clearing averages, an approximation for the controlled disbursement float advantage, remained at about 0.60 days for lockbox deposits but fell 0.12 days to 0.51 days for OTC deposits.

The charts below illustrate the evolutionary state of opening CDA points to image presentments. We illustrate two providers and show three of their surveyed control points, each in different Fed districts. Provider 1 is near the end, if not fully transitioned to image presentment. Its three points all received similar presentment mixes, each approximating 90% image and about 10% paper. The absence of IRD presentment and the large percentage of image presentment indicate that the points are open to FedReceipt and fully open within image presentment networks (SVPCO, Viewpointe).

Provider 2 is much earlier in transition. IRD volume at each of the points is near or even exceeds 50%. Site 1 appears to be open to selected participants within an image exchange network, but certainly not to FedReceipt. Site 2 received a few on-us presentments as images, but nothing else. Paper presentments also remain high at each of the sites (one-third to one-half).

It is this evolutionary process that makes using the Clearing Study to predict the eventual clearing float advantage of control points over their corresponding city points so interesting. The experience of Provider 1 in this study indicates that its control points provide roughly 0.80 days advantage for lockbox deposits and about 0.50 days for OTC deposits. We would however strongly caveat this “indication” by noting that many lockbox providers are just now converting or even yet to convert to image clearing. This is significant because lockbox provides the best chance of zero-day image presentments to controlled points due to mail that is received late evening to early morning that can generate a presentment before the 6 – 8 a.m. deadline required for same-day. Thus each Clearing Study makes us impatient for the next, in order to track the evolution empirically.

About the Clearing Study

The Phoenix-Hecht Check Clearing Study™ is the industry standard for measuring the time delay for a deposited check to be debited at the originator's bank account. The purpose of the Clearing Study™ is to reflect the minimum amount of time required for a check to clear through the banking system. As part of the 2008-1 survey, conducted in March 2008, checks were drawn on 86 banks representing Fed City, RCPC and country points in all Federal Reserve districts. During the study, Phoenix-Hecht deposited checks in 35 major lockbox cities as well as 57 bank branch locations. Lockbox deposits use sufficiently large dollar checks to ensure entry into the bank's expedited clearing programs. The deposits are timed to represent normal deposit patterns experienced by corporations and to make the bank's major availability deadlines. The low-dollar, over-the-counter deposits are timed to make each deposit site's deadline for end-of-business day activity. These over-the-counter checks often experience longer check clearing times than the lockbox deposits. For purposes of the executive summary, Phoenix-Hecht publishes drawee site results based upon an average using all deposit points (lockbox or over-the-counter). Each deposit point’s clearing time to a drawee location is weighted relative to the population of the geographic region surrounding the deposit location. Clearing times are expressed as the average calendar days from day of deposit to day of debiting at the drawee account. See Check Clearing Methodology for a complete description.

Individual bank results can be requested directly from participating banks or through Phoenixhecht.com