Cheque please!

Legally required IT projects usually make the business world tremble. They normally signal the beginning of a project with high costs and very little return on investment for the companies involved while the intended beneficiaries are often the customers or the general public, rather than the companies or organisations involved.

When it comes to the UAE Central Bank's requirement that cheque clearing processes move to a digital imaging system, the benefits for the customer are clear. With the prior manual process, the physical cheque was deposited in a bank, went through the bank's clearing process and was then sent to the Central Bank for its clearing process. All of that could take anything from three to seven days, or even two weeks for particular types of cheque, depending on whether the cheque was cashed at the issuing bank or not.

Once the new Image Cheque Clearing System (ICCS) for cheques in the UAE is fully up and running, the aim is that a cheque can be deposited at any bank at eight in the morning and the funds will become available to the depositor that same day. Aside from the convenience of such a system, it also means that the customer will not be losing three to seven days of interest that could be earned on those funds.

However, while the customer benefits are clear, most of the banks involved in this project see benefits to the bank also. Santosh Babu, head of IT at Al Masraf (formerly ARBIFT) bank, based in Abu Dhabi sees a clear return on investment for his bank.

"As an initiative provided by Central Bank, the vast amount of benefit that will come, both for the banks and the customers, will come from the time that will be saved in the clearing process," he says. "The customer will get his money really fast and the bank saves money in terms of the manual work involved in sending people to the clearing section at Central Bank, that work will all be eliminated."

Michael Mathew, IT manager at Commercial Bank of Dubai, agrees: "There will be a considerable reduction in the staff because the physical cheques need not come to the clearing centre and from there you don't need a person to go to Central Bank for its clearing. That's one of the main advantages as far as RoI is concerned. There is also an advantage in better customer service because in future, the customer will be getting the credit from their cheques from another branch on the same day."

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He adds that a further advantage of a centralised digital clearing process is for those areas that don't have a central clearing bank. Previously, cheques from these areas had to go to a different bank or to the main clearing area, which further extended the clearing time.

The staffing advantage extends also to the Central Bank itself, which will no longer need a large team to sit and manually sort through cheques all day. The Central Bank will also be storing the cheques in its repository, which means that large storage areas will no longer be needed by individual banks.

Though it seems that there are benefits for both the banks and their customers, as well as Central Bank, there have been some teething problems with this project. These problems have come less from the IT implementation, or from integration with core banking systems, but more from the difficulties in coordinating a project in which so many entities are invested.

"In terms of implementation we weren't facing any challenges as such," says Mathew, "The challenges were with the Central Bank. The Central Bank started this initiative in 2005 and several go live dates were announced and then the dates weren't met so we had to postpone and postpone."

The reasons for this are outlined by Babu Santhanam, vice president of Raqmiyat. Raqmiyat, an integrator with a wide financial portfolio, has implemented a digital imaging solution from Unisys in more than 35 of the banks in the UAE following the requirement, including Central Bank.

"There are legal challenges that are set to be addressed by the Ministry of Justice and the Ministry of Finance together, front-ended by the Central Bank. They need to address the legal challenges surrounding the image-based clearing because most of the banks are hesitant to go forward because of the risk involved in the image-clearing system being oblivious to fraudulent documents that can actually be scanned and sent across," he says.

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The ironing out of these legal issues is one of the reasons there have been several postponements of the go live date for the project, with the result that, at time of publication, no date had been set, although a trial run was due to happen at the end of October. But most of the banks seem to feel that a new go live date will shortly be set.

"After the test they will decide when to go. The problem is that there might be some banks not ready for it and there might be some problems with getting the approval of the Ministry of Law - and maybe the banking side will start without that approval," says Taleb Mohammed Ayoub, manager at HSBC.

"The date that has been indicated by Central Bank for the trial run is towards the end of October. Now once that is done I think the next step would be to tell the banks a suitable date to kick-start the process and go live with it," Santhanam agrees.

Santhanam is sure that 90% of the 35+ banks Raqmiyat is working with are ready to go live as soon as that date is issued. And he claims that the problems with the other banks are not in implementation, but that some are also running other projects.

"Certain banks are also in the process of changing their core banking systems. So if the core banking system doesn't change in the time that we take to go live then we should be up and running, but if the core banking system changes ahead of Central Bank going live, then we need to start interfacing to the new system. So those are the kinds of challenges that the 10% of the banks are facing in terms of getting things ready," he says.

Despite the shivers that go down IT managers' backs at the thought of compliance, this seems to be one implementation requirement that has come off without a technical hitch and - provided the legalities can be straightened out - it may even provide UAE banks with a return on their investment.