Inward Cheque Clearing Process

inbound check issue unclutter ProcessThe paperless environment has evolved and well-heeled now. Nowa eld, financial institutions constantly enhance the choice of the products and attend tos to win the customer. Furthermore, this is the season where avers strive to become excellent service provider by particular(a) customers expectation. With electronic documents allow a company to save clipping, increasing competency and providing excellent customer service. Hence, imaging technologies gives the necessary programme that ingested to progress to this competitive edge.Check clearing cognitive operation in Malaysia has evolved from paper energy to paperless. Day by twenty-four hours, customer deposit and issue out checks. contempt many allowance methods available in Malaysia such as net get banking, mobile banking, Interbank GIRO, Rentas (Real Time Fund Transfer System) and others, check instrument dust an Coperni dejection recompense method employ in Malaysia.Ac cording to the statistic from swear Negara Malaysia (Malaysian key Bank), it is evident that check retribution is the most preferred payment method now and in judgment of convictions to come. Although in that location is sign of evenfall from year 2007 onwards which is collect to an emergence of electronic banking, but curb testament re important high as the specie purport exceeded trillion. As such, BNM has implemented Cheque Truncation and Cheque Conversion (CTCS) crop on 16th June 2008 where all espick participants duly implemented and in operation since then. manual(a) of arms ProcessingImage-based stoppage clearing process, replaces the corporeal bank check flow with electronic entropy and image flow through and throughout the clearing cycle. The process eliminates the movement of the physical cheque from various intermediary take aims in the clearing process and hence, reduces the delays in the clearing process. Ideally, the movement of the physical cheque sho uld stop at the bank/branch of first deposit (The accumulation bank branch). This, in return, increases in operation(p) efficiency through expedient payment and receipt of funds, reduces the operational cost through the reduction or redeployment of redundant resources used for handling cash and cheques, and expedites the clearing process in the industry.Due to CTCS introduction, the physical cheques will be kept by the collecting bank by and by their images and MICR ( Magnetic Ink Character Recognition(MICR) code line selective information scram been captured and the readability verified. To master the quality of images that have captured, cheques will be needful to adhere to image friendly design standardizeds and specifications. Electronic imaging places impertinently requirement on the overall design of cheques so that they are quick legible when viewing their images, rather than the physical cheque itself. The design standard has to ensure that all es displaceial inform ation, including hand-written data and machine-printed date, will be captured by the imaging process. The captured images will be usable and legible, and that the appoint sizes of images will be small enough so that they can be stored and moved in a cost on the dotified manner. Furthermore, check truncation has been implemented in many countries like US, Singapore, Sri Lanka and Hong Kong.Due to banking secrecy, the name of the bank that will be used in this deal is Kaybank Berhad. This is an international bank with 11 branches in Malaysia which is mostly in urban and semi urban area. Hence, this bank has Brobdingnagian customer base including consumer and corporate business.There are 4 types of processes for cheque clearingInward Cheque illuminationKaybank chequesOutward Returned Cheque ClearingKaybank cheques that need to be returned due technical fracture, stop payment or insufficient fundsOutward Cheque ClearingOther banks cheques deposited at KaybankInward ReturnedOther b anks returned check due to technical error, stop payment or insufficient fundsThe author will discuss some the Inward Clearing process in this report as it is an important process and high in ledger. There is cut off time to complete the process within BNM clearing window (1.00pm) fooling. And resources requisite to cause this task is high. Attached is the process of Cheque Clearing for the industry.Process liquify of Cheque ClearingSource www.myclear.org.myTo elaborate further on this process, if a customer deposited a Kaybank Cheque of RM 20,000.00 into his/her account at Citibank, the image and the data of the check will be transmitted to Myclear (Subsidiary of Bank Negara Malaysia) via a gateaway brass (NWI). Base on the MICR data, the said account will be debited of RM 20,000.00 and the funds will be credited to customers account with Kaybank. In this case, the collecting bank will be Citibank and the nonrecreational bank will be Kaybank. The throwback time for the av ailability of funds is 2 days.Process Map for Inward Clearing process at KaybankImage VerifyApproveselective information transfer to Check verification SystemDownload of Inward file from MyclearUpload of espick data to Kaybank outlineReject the image YesNo secant level checkingYesNoReversal of customers accountUpload Returned file to Myclear act ObjectivesKaybanks key strategy is to grow their Consumer business and Corporate business. The consumer business atom continuously invests in new products and service innovations to increase its presence in Malaysia and to expand its private banking segment. However, its Corporate business has a nitty-gritty host of customers to which Kaybank leverages global presence to provide excellent quality financial products and services. However, both(prenominal) businesses have continues to improve the customer experience. It has to a fault improves operational efficiency by constant reengineering programs.The main objective of Cheque Clearing U nit is to obligate both businesses by delivering excellence service to the customers by managing their Current Accounts with error free and to manage operational cost effectively. By shifting to CTCS process, Kaybank has ameliorate the performance objectives of operation in clearing process as followsreliablenessBanks are losing million of money due to twaddle cheque. With CTCS process, banks reduced the losings tremendously as the liability to pay in the event of pseud check has been shifted to collecting bank. The collecting bank has to check infra the extremist Violet and the security features on the check and tag the item if it is takeoff to preempt the paying bank.System is controlled by Myclear and quarterly testing been conducted to ensure no vulnerability of the arrangement. Continuity of business plan has been established in the event at that place is a crisis due to network issues or others.mechanisation where cheques been automatically debited by the dust instea d of manual posting.Straight through processing been achieved where no manual invention is required.Reduced customers complaint on missing cheques when mailing out as it could be lost in transit. Now, with image base returned item, customer cant use back the analogous cheque for representment.Data file will be encrypted before move files to respective branches or clearing household.High security features established and files sent or received would not be compromised.Better reconciliation and player preventionSpeedCustomers are happy as float days of cheque was reduced from 8 days to 2days. And house check payment is given an immediate credit.Under the manual environment provide needfully to perform 500 physical cheques verification for 5 minutes but with CTCS apiece cater can perform 750 checks in 4 hours.Customers complaints will be resolved within a day as under the manual environment it takes 3 days.Staff productivity increased and performing multi tasking. representSta ff overtime has been reduced tremendously and having quality time with their family. manual process requires 12 working hours for separately staff compare to just 8 hours now. Calculation of preservation are as followsCost saving on Overtime = 30 Staff x 4 hours= pine hundred hours a days x 23 days= 1760 x 22.50 per hour= RM 39,600.00 per monthHence, for month the bank has saved an approximately RM 39,600.00 in overtime due to CTCS process.Cost of purchasing the body is only one time and maintenance and licensing rental is lower compare to physical cheques management.Staff mail claims and meal allowances were reduced to none as theay are not required to work long hours anymore.No shipment of cheques to Clearing House is required now due to transmission of data.There are 30 staff been employed previously to manage inward clearing volume of 40, 000 daily but now only required 18 staff. The other 12 staffs were redeployed.Retention period of cheque is only a year under CTCS as compare to 7 years previously. Daily a heart and soul of 40,000 cheques processed daily and requires 10 boxes to place the cheques. The saving calculation is as follows= 10 boxes x 23 working days= 230 boxes x 2.50 periodical storage per box= RM 575.00 x 12 (months) x 6 (Years)= RM 41,400.00Hence, for month the bank has saved an approximately RM 41,400.00 due to CTCS process.FlexibilityMaintain scrutinise Log where it monitors the user details and accessibilityPrepares or generate MIS report for volume tracking and for departmental budget planning.It is also a core banking system online approach to upload or download data or batches.Interfaces with internal and external system like signature verification system, Cheque deposit Machines and clearing house.It has provided centralized cheques clearing processing and supporting branches from Penang and Johor Bahru where previously under difference clearing zone.QualityCustomers are happy with the service as their cheques are now saf e from fraudsters.Inward Clearing process is simple and the staff can perform multi function and deliver nigh(a) quality of work as they are not required to work long hours.Each operation under CTCS is controlled by Unique Identifier figure (UIC) which is a unique reference number printed on the back of the cheque by the collecting bank and it will make the retrieval for investigating ad presenting of unpaid items are easier.Better controls established due to change process and enhancement and will not lead to financial losings or customer issues.Cheque Verification SystemKaybank has invested in a E-flow system for check verification. This system is supported by in house Technology team. Once Inward Clearing data downloaded from the Gateaway system, it will be downloaded to the E-flow system for verification. Each workstation will have a single Central Processing Unit (CPU) and 2 monitors. One to view the image and the other monitor is to display the signature. There are 7 type s of cheques processed and each will have a different process and approach. Hence, images and MICR data downloaded to E-flow system and will get sorted and channel to the respective station. For control purpose, the main function for this system is display the image for verification purpose and reconciliation. Kaybank has also emphasized on second level verification for certain limen to avoid any mistake done by the first level verifiers.However, there are some flaws in this system as followsThe system has limited products. As of now, the system was designed to cater 7 products and if there is an additional product in the market and Kaybank wanted to implement it, there will be an issue. It may mix up with other products.If a particular product it to be ceased, then the station will be remain there. For example, Credit Card cheque has been stopped by Kaybank due fraud vulnerability since Septemeber 2010. The station is there and it cant be upstage as it would contract cost.Any ch anges or addition into this system involve cost and it is expensive.Tagging of checks as altered by the collecting bank is military issue to readability of the person who verify the said cheque. Hence, the CTCS ruling astablised by myclear is unclear. As it is subjected to apparent alteration sight by the processor. In the event, the cheque has been swear out and altered and the alteration on the check is not apparent, then the collecting bank is not liable for the losses. In turn, it will be shifted to the paying bank to pay the losses. This rule in unclear and it is not proper for the industry.Inward Clearing Volumes from January 2010 till October 2010Source Internal MIS for Inward Clearing TransactionsEmerging TechnologiesOn the other hand, cheque fraud be Malaysia millions of losses a year and presents severe challenges to the industry. Hence, a better system needs to be deployed for the effectiveness of the current process. hireee Match Positive Pay Application technology has already started in U.S as it was developed by Parascript, LLC, Niwot, Colorado, U.S. The main objective of this system is to combat cheque fraud. The system is designed to read a cheques payee line information and cross validate the data provided to the bank by the customer via Cheque Issue File. This system assures trueness and significant reduction of check fraud. Furthermore, with if this system should be implemented, funds can be made available in T + 1 (One day Clearing). If the adoption of this technology is feasible, then they will be no mend to the process as it works the same and the only difference is the system. Referring to the communicate volume, for product like Paylink, Manager Check, Payment Order and to some expiration corporate customers the verification can be automated. Since companies update Kaybank with their list of the cheques issued out the beneficiary, this system can perform auto match and approved the transaction without manual intervention. The s ystem could be expensive but in long them, there will be no fraud cheque .Genichi Taguchi (Nigel Slack, surgical procedure Management), has highlighted to test the robustness of a design to ensure it withstands any change. However, in this case the changes only affect the system as all verifiers need to verify some number of cheques daily. The terminal is stationed at their respective workstation. Hence, there is no impact on the job design, layout and flow or operations. Although, the volume will decrease to some extent as with current capacity, staff may need to verify cheque lesser. On the other hand, with the carrying into action of new system, staff has to be trained and they could be error addicted as this will be totally a new system. recommendationWith regards to the system enhancement, Myclear as a regulator should take the lead and wangle clearing process. Internally, Kaybank may able to deploy a good system but Positive Pay system is very new and super expensive wher e a single bank will hesitate to buy the system. However, with the involvement of Myclear and all member banks, all should share the cost to conduce the system to Malaysia to develop together. With this, the cost will be cheaper and can be affordable and all the intermediaries will have a common platform to work with.ConclusionAlthough, the current system deployed by Kaybank is reliable, there will be no assurance when the fraudster will strike the banking industry with their forward-looking technologies. Hence, BNM, Myclear, ABN (Association of Banks) and member banks must pursue other alternative to prevent fraud attempt by the fraudsters sooner. The Police too have to amend laws to swig severe punishment to nab the fraudster.