Summary of 2010-1 Check Clearing Study
Maturity of Image Presentment - Quantified

Since the spring 2006 Clearing Study™, clearing times have shown rather consistent decline with no strong indication of that trend ending. In the executive summaries for the intervening studies, we have commented perhaps on the rate of decline for RCPC (control) points versus City points, but the theme has been consistently “decline”. In contrast, the spring 2010 Clearing Study™ paints a numeric picture of a system approaching maturity. As depicted in the graphs below, aggregate clearing times this study appear to be leveling.

For lockbox deposits, the aggregate city point average remained almost unchanged (-.01 days) while the RCPC point average declined just 0.08 days, about half the level needed for statistical significance. For the previous survey, the city point average had fallen 0.08 days (the current RCPC rate), and the RCPC decline had been twice its current amount (0.17 days

For teller, so-called “over-the-counter” (OTC), deposits of smaller dollar items, the reversals were a bit more pronounced. The city point average actually crept upward 0.04 days, statistically insignificant, but last seen during the 2006-1 study. The RCPC average, after declining 0.17 days for the previous study, fell only one-quarter of that rate, a statistically insignificant 0.04 days.

The reader is reminded that these measurements are calculated in calendar days; thus, an exact business day’s clearing for equal deposits made Monday – Friday produces a 1.40 day result. Aggregate OTC city point clearing time less than a calendar day and aggregate lockbox deposit averages less than a half calendar day indicate quite substantial portions of same-day clearing.

Overall, the 2010-1 Clearing Study ™ exhibited leveling rates of aggregate clearing averages for both lockbox and OTC deposits. This “leveling” was in rather significant contrast with studies since 2006. Change in clearing times this study was limited to select institutions that appear to have been “slower” in the image conversion cycle. As we noted last study, and it is even more evident this study, predicting check clearing time now has almost nothing to do with geography. Instead, it has everything to do with how “connected” a bank is to image clearing networks. In fact, in the current survey, the numerically longest clearing average occurs for a city point designation.

Despite obvious decreases in check clearing times, controlled disbursement continues to provide consistent value for corporations, averaging about 0.9 days for nationally distributed lockbox deposits and about 0.5 days for OTC deposits. This, plus the fraud prevention characteristics that can be utilized in conjunction with the CDA account, provide quite a powerful cash management tool.

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 2010-1 survey, conducted in March 2010, checks were drawn on 71 banks representing Fed City and RCPC 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