Modernizing Canadian Check Clearing: Community Bank Insights

Sonia Portwood (00:06): Hello, and welcome to Banking Out Loud, the podcast where we have candid conversations and share insights on the banking topics that matter most to you. I'm your host, Sonya Portwood, and in today's episode, we're going to be exploring how community financial institutions are navigating change and finding new ways to serve their customers. Specifically, how they are modernizing the way they clear Canadian checks with meaningful gains and efficiency, cost savings, and risk management. You're about to hear from three bankers who will share real world examples of how they've improved cross-border check clearing by partnering with PCB and the Fiserv Clearing Network. Leading the discussion today is our own Matt Helsing. He is our regional manager in the Northwest and our International Banking Solutions Specialist. He will be moderating our panel today, so let's listen in. Matt Helsing (01:04): Thank you, everyone, for tuning in. My name is Matt Helsing, regional manager for the Western United States and International Banking Solutions here at PCBB. I recently had an opportunity to speak with three bankers about some of the challenges they face and their experiences improving efficiency in cross-border check clearing, how they've reduced friction managing risk and delivered fast and more reliable service to their customers. Now, you may be asking, why are we still here talking about checks when there are so many other technologically advanced payment methods out there at this time? While that may be true, the fact of the matter is we are still faced with hundreds, if not thousands of checks that we process on a daily and monthly basis, many of which are actually foreign checks. And typically, 90% of all these foreign checks that your bank or institution receives are coming in from the Canadian market. (01:56): So recognizing this is still a nuisance and a tedious process for which many institutions process these items is why the solution came to fruition. It's offered many improvements to the process along the way, operational efficiency, cost reduction in both carrier fees, as well as many other miscellaneous fees. The entire end-to-end procedure is sped up tremendously through this streamlined process. Credit risk has been reduced, the settlement process is faster, and the best part for all of you out there is that there is no additional equipment that is required to implement this solution. So, with that being said, I wanted to introduce our esteemed panelists today. We've got three joining us from across the country. First, I'd like to introduce Joanna Champagne, who is the assistant vice president and operations officer at Franklin Savings Banks in the great state of Maine. That's a $670 million asset institution. (02:51): She's held many vital roles during her banking career, from item processing operations specialist. She did the Check 21 implementation. She's also been a branch manager, and in her current role, she oversees deposit and loan operations. She also serves as the vice president of liaison for Franklin Savings Banks over the years. Next up on our panel, we have Corey Flynn, who is the VP of payment operations at Bridgewater Bank in Minnesota. They are a $4.7 billion asset institution where Cory oversees deposit operations, e-payments, and payment risk teams. In his 10-year plus career, he's held back office banking operations roles and was key in the successful implementation of many of Fiserv products, which includes Payments Exchange, ATM, and the Fiserv Clearing Network/Canadian process. He has valuable experience partnering with foreign exchange desks at many correspondent banks to do foreign currency, orders, checks, wire transfers, and other types of transactions. (03:57): And our third and final panelist today is Lana Hollier. Lana is the SVP and director of deposit ops at Sanibel Captiva Community Bank in Florida. They are an $880 million institution with over 40 years of banking experience. She has spent the last 20 years at Sanibel Captiva, and she has seen a lot of changes in the banking industry, and one constant she'd like to point out is that she has been a Fiserv client and her entire career is extremely proud of that. So let's hear from the folks who have worked with this process and can give you some of their feedback and valuable experience. What I'd like to do at this time is open it up and first hear from each of you where you were in regards to how you processed Canadian items previously, and then kind of walk us through your individual process of how you converted over to this new streamlined solution. (04:48): Lana, let's go ahead and start with you, if I may. Lana Hollier (04:51): Sure. It's probably been about a year or so that we've been using it, but when we originally went over to this, we were kind of doing things the old fashioned way with our foreign items. Our tellers first had to identify those foreign items. Um, once identified, they had to replace them in the work with a GL number and a GL ticket and actually put that in an envelope and the courier picked it up, brought it over to deposit operations. We then had to determine, is it US funds? Is it Canadian funds? Do cash letters, send it overnight, the old fashioned way. This has just been a big improvement for us. I can't say enough good things about it. It was a simple process. It was easy for us, but many pluses. I can't think of any minuses. But it's been great for us. We love it. Matt Helsing (05:40): Great. Thank you, Lana. Corey, let's hear it from you and, and what your previous experience was and then how this has changed that for you. Cory Flinn (05:46): Our experience is similar to the client would bring in the check, give it to the teller, they'd scan it, go to a GL, and then it would get sent over to the operations area. The only difference that we had was with having a relationship with PCB. We would upload the image to their site and submit it that way. And so now with everything set up with the FCN, it just goes directly from the teller to the PCB and we can just process it that way. So we're skipping a step from having it get sent over to the operations staff. So it's been a streamlined process for us. Matt Helsing (06:16): Outstaniding. Thank you for that. Lastly, let's hear from Joanna. Joanna Champagne (06:20): So our experience was a, a little bit different. I think we all kind of started in the same space, you know, really having that manual process associated with not only identifying the Canadian items, but really having to send those paper, pay those overnight fees. It was just very manual at every level. Since really starting to implement this and since we've been using it, we actually made a shift internally as far as kind of where that labor is residing at this point within the institution. So we really took a lot of that manual intervention and additional steps that were required and have taken that and centralized it in our operations area. So while the teller platform will identify those Canadian items for us, we no longer have to pull out the paper and we can process those Canadian items through the teller system. We really have to identify whether it's drawn on US funds, Canadian funds, and then insert a train code accordingly. (07:25): That's really where the intervention stops for our teller staff. So those items are submitted, um, electronically through the teller system as any other transit check. But on day two, we actually are utilizing PCBs portal in order to address those items. So for us in operations, we are going out, we're looking at those cash letters on a daily basis, and we are at that time determining is the item drawn on Canadian funds? And if so, what is the exchange amount? And then from there, we're taking, you know, that exchange amount as well as any fee that we, um, may incur for the customer and running a TMS transaction to actually impact those customer accounts. So that has really been a, a super operational efficiency for us and we've seen some really great results. Our customer service representatives, our tellers on the front line are doing a wonderful job identifying those items and making sure that they are clearing properly, whether it's in Canadian funds or US funds. (08:31): But the operational efficiency we have gained has been tremendous. I definitely would not want to take a step back into that paper environment now that we've been using that. So it has really streamlined things for us significantly. Matt Helsing (08:46): Great input there. You touched on the topic of exchange rates, and I think it's important to talk about how this process addresses exchange rates and mitigates the happening of adjustments after the fact. Corey, I'll go back to you if you want to comment about how exchange rates are handled and how adjustments are limited in this process. Cory Flinn (09:09): Yeah. We get the exchange rate from the moment that check is received from PCB, so that helps not having to go back and run an adjustment to the client's account like Joanna was stating on their process. We had the same setup with TMS. We'd give the client the face value of the check, submit it, give them the adjustment for whatever we were getting the exchange rate for and then waiting for it to come back. Now with settlement, we can do that adjustment on day two and not have to worry about floating any money to the client for that exchange rate. That's kind of how our process has been, has been working. So that's made it a lot easier for us on our end. Matt Helsing (09:44): Great. Lana, do you have any additional comments around exchange rates or, or how the process has been different for you? Lana Hollier (09:50): No, just to piggyback on, uh, what Corey and Joanna have already said, it is very nice that next day to see those exchange rates. You can do that TMS entry to the customer and they're not waiting that week or seven to 10 working days before they find out what that exchange rate is. So that's been very beneficial to us to have that available to us right away. Joanna Champagne (10:07): Definitely. I would agree there, Lana, too. We actually used to only update our Canadian rate on a weekly basis, but PCBB provides us that daily rate. And the neat thing is that exchange rate on the date that Canadian item is deposited follows it right through, through settlement. So that for us really has been, you know, it's just taken some of that gray area out of the mix. And, you know, I, I was a little concerned up, up front, you know, as we started to consider this implementation that, you know, we may not have that Canadian rate early enough in the morning for us being East Coast versus West Coast where PCB resides and, and just afraid that maybe we weren't going to be able to get those exchange rates in place prior to our branches opening, but that has not been the case. East Coast time, we're really, we're receiving that daily rate around 8:30 each morning, so we can have that in place prior to our branches opening, and it has just really made, you know, that clearing process much easier. (11:10): And I guess along that same line, I would just add to Lana's point, you know, this is now a three day process. You deposit your items day one, you're addressing them in PCB on day two, day three, you're receiving the credit for those items through the FISR clearing network settlement. So, you know, instead of having to physically mail these items and potentially wait two weeks sometimes for that credit, you know, we are just closing that gap in just a couple of days, which has been wonderful for our accounting department. Matt Helsing (11:44): Those are great points and probably the biggest plus of this entire solution is just that three day turnaround is a, is a fast improvement over most other processes out there. You talked about mailing items and the fact that, you know, many of our banks out there are still sending off paper to some correspondent or maybe the Fed, but this solution obviously being all digital, the fact that you can save money on courier fees, postage, and not to mention folks time in doing that process, can anyone estimate what that might be from a dollar standpoint on a monthly basis? I'd be curious to get your estimation of that. Joanna Champagne (12:25): Well, here on Sanibel, we have a lot of foreign customers and a lot of, uh, HOAs that we bank here, and a lot of them do use their checks in Canada and what have you to pay those HOA fees. So we're sending out a package 99% of the time every single day is what we were sending out overnight. So those fees alone have made a tremendous difference for us. Just an overnight package for every working day of the month. That's been a huge savings. Matt Helsing (12:53): Yeah, we all know overnighting is not cheap, so I'm, I'm gonna estimate at least hundreds of dollars there per month is my guess. Joanna Champagne (13:02): Yes, at least. It wasn't so much cost driven as risk driven. So, you know, for us, uh, when you're taking that paper or, you know, that paper is in the mix, if you will, regardless of whether you're paying the overnight fees or you're mailing at USPS or whatever your process might look like, there's always that risk. And we have more than once had Canadians lost in transit, and that in itself is a very time consuming process. You really have to work back, hope that the teller had taken a photocopy of the item before it was mailed and got it over to our accounting department so that we could then in turn indemnify or whatever it is we needed to do to recreate that item and, and get it out for processing. But I do think, although we're not seeing a, a tremendous financial benefit, I think we are saving a couple hundred dollars a month, but for us, it was really just removing that risk or as much risk as we possibly could. (14:04): We may not be saving $2,000 a month, but we are absolutely gaining a lot of peace of mind. Lana Hollier (14:11): That's a good point, Joanna. And, you know, talking about peace of mind, when you're replacing a foreign check with a GL number, integrated teller, if you run that GL number with that credit, that's gonna give that customer next day availability, which you may not want that for some customers, especially with a foreign check. So just the fact of not having to replace that check with that GL number to credit a customer's account makes a big difference as well, because you're not giving them that immediate availability Joanna Champagne (14:40): On that. Absolutely. And, you know, another benefit I feel is tremendous for us is being able to have those images in director, not just the archival platform that we're using and maybe not everyone is using director, but whatever system it is you're using to really archive and access documents and check images and those sorts of things, that wasn't an option prior to being able to image these electronically. We didn't have the ability to see those images and, and have them at our fingertips as we may have needed or wanted. So being able to clear these electronically and maintain those images in our system for easy access, again, not necessarily related to a financial benefit, but certainly a benefit that we're finding as part of this implementation. Cory Flinn (15:25): Agreed. Yeah, and that was our thought process too when we switched. We were already digitally screening them to cost for overnighting, but it's just losing the checks and transit from the, the teller line to operations and just kind of reducing those barriers of getting the items to us. And then streamlining it through integrated teller, having it flow right through the system just makes it so much easier for the frontline staff and the back office stuff. That's Matt Helsing (15:50): Great input. I wanted to ask about the ease of implementation and training. How was the experience for you? Lana, we'll start with you on this one. Lana Hollier (15:58): Okay. It was very simple. My IT department jumped on that right away and after that, I do have the ability to log in or remote into my teller's computer. So I let them know on day one, the first time you see this foreign item, which is going to come up and integrated teller, give me a call. I jumped in with them and showed them exactly what to do. Just such a simple process, just mainly look for that train code. And as long as they're looking at the item and looking at that train code and making sure that the right train code post, that's all they had to do. It was an oh no, nothing seamless process. It sounded a whole lot more complicated than it was, but it was very simple. All of our tellers just jumped right on board and it was Matt Helsing (16:37): Seamless. Great. Corey, anything to add on, on your implementation experience? Cory Flinn (16:42): Yeah, our implementation experience is really, really good as well. Um, you know, from Fiserv to PCB, everybody was very good in their training, showing us how the process worked. We had internal trainings with teller staff to kind of show them the process, our systems and branch operations teams handled that training. Um, the only thing I would make people aware of, just make sure that you know what your sort pattern is because we ran into some difficulties with that. Just have a lot of items to test to make sure that you're covering all the different kinds of items that you may receive in your institution. That's Matt Helsing (17:12): A good point, Corey. You know, there's different, different types of check payments that may be slightly unique and we certainly want to run those through the process as well. Joanna, anything to add from your point of view on the implementation process? Joanna Champagne (17:25): Sure. I definitely would agree with Corey. I think it was fairly straightforward. We also did run into some challenges with our sort patterns. There was some back and forth with Fiserv, but with any project, there's going to be hurdles to jump and I think we all work together well to do just that. Some things that we learned maybe much later in the process, I would encourage those of you that are making this transition ask about returns. Because the Canadian exchange rate changes on a daily basis, it does take on that current day's exchange rate when items are returned. So that is one of the things you'll really want to consider as an institution is how do you handle the discrepancy between the amount in which you received credit for as part of that settlement and the amount that you are going to be charged for that return because it will differ. (18:22): Overall, I think the implementation went very, very well. You know, nothing unexpected, I guess, uh, projects are just that. We can never really anticipate everything. Cory Flinn (18:32): Yeah, we experienced the same thing on our site too, not understanding how that exchange rate would follow back through. So just kind of ask a lot of questions like Joanna was saying, understand process from the beginning to the end. Matt Helsing (18:43): Thanks for those comments. Those are definitely good points to be aware of. One of the last things I wanted to touch on was any strategic advantages this new process has given your institution. Yes, it's mostly a back office function, but I think one that was uncovered in our discussions early on was around merchant capture. Joanna, I think you had a point about this gave you the ability to integrate with some merchant capture services, and maybe you can expand on that a little bit. Joanna Champagne (19:09): Yeah. This was super exciting for us. Um, so for those of you who are really considering making the transition for those items being scanned through our teller platforms, I would also encourage you to explore the merchant end of this process. We actually, you know, when we kind of started this process with Viserv, that was one of the things that they had asked us, you know, "Do you want this to be strictly, you know, do you want to just accept these through your teleplatform or do you want to allow your RDC customers or merchants that are scanning checks to be able to take advantage of this as well?" And for us, it was a no-brainer. We have some customers, RDC customers that are not close at all to any of our branch locations. So for them, there were instances where some would have Canadian items that were hundreds of thousands of dollars that they were having to hold onto for sometimes a week or more because they needed to have resources or staff to be able to make that trip to the bank to actually be able to deposit those items. (20:15): And it has been tremendously helpful for their businesses. Again, they're submitting these items electronically and they're receiving the credit very, very quickly, not at all like they used to. And I do think what's definitely warranted in mentioning the process for the merchants is completely seamless. They literally have no idea that they even have any Canadian items. The system identifies it for them. They submit the deposit like any other deposit with transit checks or honest checks, whatever might be in there, and those items are going out for clearing and they're receiving the credit. Again, you know, we're receiving credit day three. The customer is really all set to go after we process those items through PCBB on day two. So it has been a tremendous efficiency for them, not having to make bank runs or hold onto those items, keep that cash flow moving for them. (21:12): It's really been a significantly positive impact, um, on that front. And it was one of those things I was a little surprised to hear that some others weren't even aware that this was an option. So we have had some feedback, but for those merchant customers that were submitting Canadian items and holding them for long periods of time, we have had a couple of different calls from those customers. So grateful just to the impact that it's had on their business and their ability to keep that cash flow moving. Matt Helsing (21:44): That's great. It can be more than just a back office improvement is the message there. And so we encourage you to, to look at your merchant process along the way and to see if this can also offer you some extra benefits there as well. Great. Well, thanks so much panelists. We really appreciate your advocacy and sharing your experience here today. Thank you so much for your time. Sonia Portwood (22:06): Thank you, Matt, and to our panelists, Joanna, Corey and Lana for sharing their insights and experiences, and thanks to you, our listeners, for joining us for this episode of Banking Out Loud. If you haven't already, be sure to check out our other episodes and subscribe so you'll know when a new one drops. We're always looking for ideas for future topics and guests, so if you have a suggestion or if you'd like to join us as a guest, send us an email at bankingoutloud@pcbb.com. Thanks again for listening in, and until next time, take care.