Faster cheque clearing for corporates

An automated system of manual cheque processing offered by First Gulf Bank has enhanced its customers’ efficiency and reduced their working-capital cycle and cashflow management

In the Middle East, despite all the efforts within the banks towards automation, the cheque continues to be a common instrument or means of exchange. Even though better processes are evolving at the customers’  end, the processing of cheques and managing collections by traditional means is still a challenge for clients. This in turn, affects the working capital management cycle of the customers.

Cheque processing is also expensive because of the inherent and hidden costs involved in terms of the following

• mailing time
• 
recipient handling
• clearing time.

All of the above lead to inefficiencies and delays in realising the funds for customers.

The long-time reliance on cheques in the Business-to-Business (B2B) sphere has still kept its usage high. Moreover, counterparties may not accept electronic payments despite various incentives such as discounts offered for electronic payments.

In fact, businesses appear to see little reason to switch from cheques, because they do not believe they have the transaction scale to capture worthwhile savings from switching or because of new costs (in infrastructure and processes) in adopting electronic alternatives.

Considering the present scenario, the focus remains on improving the efficiency of cheque-processing by allowing electronic presentation of paper-based cheques — a move that has prompted banks to make huge investment in cheque imaging systems. The Middle East switched from the traditional physical exchange of cheques to electronic image-based clearing from 2009, moving towards complete truncation in 2011.

The present focus is on improving the efficiency of the current cheque processing system for clients and in order to unlock funds for effective working capital management has led to the introduction of FirstValue, a ground-breaking service introduced for the first time in the GCC region by First Gulf Bank (FGB) in 2010.

FirstValue is a remote cheque deposit solution that enables corporate customers to scan all their collection cheques digitally from their office premises at their convenience. It means that corporates can now deposit cheques without having to leave the office. This unique proposition allows corporate clients to present their cheques electronically to the bank by extending the bank’s cheque scanning process remotely to the client.

The process of using FirstValue is briefly described below:

• FGB will provide cheque scanners and software compliant with the Central Bank of the UAE’s clearing service “ICCS” to corporate customers wanting to avail themselves of this service
• the system is then connected to the bank in a secured manner (using two-factor authentication)
• post installation and the granting of appropriate access rights to the corporate users, the client can login and scan the cheques in batches and transmit cheque images along with metadata (cheque number, amount, cheque date, etc.) to FGB
• the MICR band information on the cheque is easily read by the scanner and automatically populated thereby minimising manual input. Enriched information can also be provided as per requirement
• the system has inbuilt controls to validate information, such as batch totals and number of cheques
• once the requisite information is entered and captured, the batch follows a verification process, enabling a maker-checker flow on the cheque(s)
• post verification, the system generates a deposit slip providing cheque details and image file that will be transmitted to the bank via a secure network
• cheque-clearing process will start after receipt of the image file and metadata.
• credit for the cheque(s) will be passed into the account on the same day after receipt of the cheque status – cleared or returned – from the Central Bank
• the physical cheque(s) can be delivered to the bank by the next day. FGB also provides a collection facility to its customers thereby eradicating the need for a company representative to visit the bank

FirstValue provides a fast, convenient and secure method of cheque deposit and clearing thereby enabling the customers to reduce the administrative burden of traditional banking processes and associated costs. It also provides access to detailed transaction reports assisting in efficient working capital management and better decision making.

This proposition also provides the following additional benefits to corporate clients:

• reduction in administrative costs
• reduction in float by shortening the process cycle
• outsource of a non-core activity to the bank, thereby increasing productivity
• 
generation of current and historic reports for better decision making
• availability of online information
• a secure and streamlined process
• a simplified reconciliation.

George Abraham, group head of Corporate Banking at FGB, said, “Customer centricity is the cornerstone of our client-led strategy. As a leading bank in the UAE, we always strive to set standards of excellence while exploring new opportunities and pursuing innovation.

“In line with our commitment to deliver quality products and services that address the dynamic needs of our customers, FirstValue offers a compelling proposition wherein we have used a simple IT solution to ease out much of the day-to-day operational hassles of our customers such as manual cheque deposits and reconciliation. FirstValue allows our customers to optimise cashflow management by maximising their liquidity, therefore giving them an operational and competitive edge.”

In order to avail themselves of this service, corporate customers are required to sign a master agreement with FGB. If required, customers can also enter into an agreement with a FGB-approved courier for the collection of cheques from their premises and delivery to the branch by next day.

“We invite corporate customers to experience the convenience and benefits of this service,” said Rajesh Gupta, SVP and head-business and transaction banking at FGB.

Ever since the launch in 2010, a number of customers have benefited by using the FirstValue solution. One such client is National Trading and Development Corporation(NTDE).

National Trading and Developing Establishment is one of the Gulf’s leading distribution and logistics provider for international consumer brands in the region.

It said, “In our business of distribution and logistics, we receive thousands of cheques from our customers that have to be processed manually. We were looking for a solution from our banking partner to help us automate the process and reduce the time and effort it takes us to deposit these at the bank with the usual morning rush-hour on the roads, cut-off times at the bank counters for same-day clearing etc.

“We have been using FirstValue from FGB for the past two years and have really benefited from this offering. Now we manage the process in a completely de-stressed environment wherein we do not have the usual morning rush to meet the banks’ cut-off times.

“We are now able to deposit all our cheques in our bank account with FGB without leaving our office and the physical cheques can be sent to the bank the next day. It has not only enhanced our process efficiency by automating this predominantly manual process but have helped us reduce our working-capital cycle and cashflow management.”