|
Articles Opportunities and Perils in MICR PrintingFrom the August 1992 issue of Printout, Reprinted by permission of BIS Strategic Directions In 1992, the United States is expected to require a total of roughly 90 billion MICR documents, with checks accounting for approximately 60 billion.(Other types of MICR documents include loan books, mortgage books and deposit books.) The number of checks is expected to increase to 65 billion by 1995, according to the American Bankers Association (Washington, D.C.). Today, electronic printing creates less than 10% of checks and other MICR documents, and desktop printing one thousandth of that. Printing checks electronically offers many advantages, reducing the costs and the security risks of storing and transporting checks. However, the window of opportunity will not stay open forever. Some experts believe that bar coding is gaining momentum as a way of coding checks. Other methods of payment, such as electronic data interchange (EDI) and debit cards, are already slowing the growth in the use of checks, and later in the decade, the number of checks written is expected to decline. CustomersPotential customers of MICR printing fall into two categories, each with their own agendas: The first are financial businesses such as insurers, payroll companies, property management companies, mortgage companies, that issue large numbers of checks and MICR encoded documents on multiple accounts. These companies are the most likely to benefit from desktop MICR printing, decentralizing printing to branch offices, and saving storage and mailing costs and security risks of maintaining large quantities of blank checks. The second category consists of other businesses that want the convenience and cost savings of printing their own checks. These companies will be attracted to HP's solution; thinking that all they need is a font and a toner cartridge, and flail under the effort of integrating check printing with their accounting system, and keeping quality and security up to par. It is this second group that invites scrutiny with the HP announcement. How do Small Businesses Buy Checks?The International Business Forms Industries (Arlington, VA), a trade association for forms manufacturers, recently conducted a study of 200 small business (20-99 employees) in order to discover how they print short-run checks and where they buy checks. The IBFI results suggest significant potential for desktop MICR printing among small businesses, but only if such businesses prove willing to take on the responsibility of MICR printing. IBFI found that 53% of the small businesses that used short run checks purchase computer-continuous checks, and an additional 22% purchase pre-printed cut-sheet checks. These firms that already print some check information electronically are strong prospects for desktop MICR printing. According to the IBFI study, the most popular places for small businesses to purchase short run checks are banks, forms producers, commercial/quick printers, and forms distributors. According to Doug Taylor, VP of Programs and Services at IBFI, forms companies that now sell pre-printed checks may look to establish partnerships with MICR VARs in order to participate in electronic on-demand MICR printing, thus capturing part of the revenue stream they would otherwise lose. Players in the MICR MarketIn the past, high-speed impact band printers, from IBM and others including NCR (Miamisburg, OH), Standard Register (Dayton, OH), and Troy (Santa Ana, CA) have produced much of the electronic MICR printing. NCR is the largest impact player with 60% to 70% of the market. There is a large installed base of impact MICR printers, but this segment isn't growing. Today, growth in the MICR market is focused on the non-impact side. The lion's share of MICR non-impact electronic printing is produced by high-end (50+ ppm) laser printers like the Xerox 8790 and 9790, IBM 3828, and Siemens 2200, with Xerox in the lead. This market continues to grow at a rate of 10-15% per year. The Desktop Players: Vendors and VARsLower-speed non-impact printers (under 15-ppm) comprise the fastest growing segment of the market. Annual sales in 1991 were in the very low thousands at best. Sales in 1991 did double over the previous year but have not reached the hundreds of thousands predicted by optimists. Desktop engines that have been modified for MICR use include models from Ricoh, Pentax, Kyocera, and Samsung. Ricoh has recently discontinued its 8 and 15-ppm printers, putting holes in vendors' product lines that are likely filled by HP-based solutions. There are also a host of small companies that sell recharged Canon cartridges filled with MICR toner. The reputation of these products is uneven, at best. In the last year, several groundbreaking new products entered the market, the 11-ppm Xerox 4197 ($7,895) based on a Fuji Xerox engine, and the 10-ppm Troy 410 ($4,750), based on the Lexmark engine. These were supposed to break the market open. So far, this has not occurred. Desktop MICR printer sales have been hampered by a lack of software to integrate financial applications---bank account records, insurance policies, or payroll processing----with desktop printing. Such integration maximizes control and security. Companies that can provide and integrate this software are becoming an increasingly important channel in the MICR printing market. To boost sales, both Troy and Xerox have launched campaigns in recent months to sign VARs to integrate and resell their products., and the HP products are likely to be hit with MICR VARs as well. The Perils of MICRAlong with the opportunities of desktop MICR printing come hazards: quality control and security. These issues may dissuade users from printing MICR in the first place. In fear of skyrocketing check rejection rates and rampant check forgeries, bankers and regulators may push for restrictions on desktop MICR printing. Quality ControlMICR is a very demanding printing application---toner must stay on the paper under adverse conditions, including weather fluctuations, human handling, and repeated runs through reader/sorters. Failed scans are expensive and time-consuming to correct. The American National Standards Institute (New York, NY), known as ANSI, has a special committee to develop MICR printing standards. ANSI has determined that MICR documents must survive 30 passes through scanning equipment. In order to avert scan failure, ANSI has mandated precise requirements for toner signal strength, for MICR fonts, for the registration of MICR markings, for toner adhesion, and for paper grain and moisture content. So far, two published standards are available: one covers printing specifications for MICR (ABA 092200) and the other covers printing placement and locations (ABA 092700). These standards that can be ordered from the American Bankers Association (ABA) in Washington, D.C., for $50 each. There is also a subcommittee, chaired by Jim Loomis of Bottomline Technologies, working on testing and compliance standards for MICR vendors. SecurityAnother serious problem is ethical rather than technical. Roy Van Denburgh, the chairman of ANSI Standards Committee X9.B, noted in a recent article of Xplorer, the newsletter of the XPLOR electronic printing trade association, that "desktop publishing systems using a desktop printer are one of the major creators of fraudulent checks." Estimates of check-fraud losses range from $750 million to $1.5 billion. The issue of MICR security is being addressed in two ways: technological, and regulatory. Many vendors have implemented security safeguards in their desktop MICR system using a variety of techniques:
Even with these security features, the possibility for fraud still exists. The ABA has established a check fraud committee that comprises bankers, vendors, and Federal Reserve representatives. The committee is proposing legislation that would extend the amount of time banks have to clear checks, thus giving bankers more time to look for fraudulent checks. |
|
Home
Sources
Articles
Resources
FAQ
Click here to submit to the MICR Repository. The MICR Repository is
sponsored by |
