Parascript, LLC 6899 Winchester Circle Suite 200 Boulder, CO

Transcription

1 PAYEE MATCH POSITIVE PAY APPLICATION Using Total Recognition Technology to Reduce Check Fraud and Increase Efficiencies in Banking and Financial Services Industries Parascript, LLC 6899 Winchester Circle Suite 200 Boulder, CO

2 PAYEE MATCH POSITIVE PAY APPLICATION Using Total Recognition Technology to Reduce Check Fraud and Increase Efficiencies in Banking and Financial Services Industries A Parascript White Paper CONTENTS Executive Summary...3 Part One Traditional Image-Based Positive Pay...4 Part Two Automated Payee Match Positive Pay Application... 5 Part Three The Application at Work... 7 Matched Check File...7 Exception File...7 Statistics File...7 Exception Handling...8 Custom Configurations...8 About Parascript, LLC...9 Page 2

3 EXECUTIVE SUMMARY Check fraud costs U.S. banks, businesses and individuals more than $50 billion a year and presents serious challenges to the banking and financial services industries. Although analysts acknowledge that Positive Pay applications do indeed combat check fraud, such applications typically depend on manual processing. Consequently, Positive Pay applications incur exceptionally high costs of implementation and management. Parascript s Automated Payee Match System for Positive Pay is an enhancement to the Traditional Image Positive Pay application. This custom solution based on Parascript s unique recognition technology automates the payee matching in the Positive Pay process and thereby greatly reduces costs associated with manual processing. This approach allows for customer specific requirements and optimization of the application for their individual needs. The Parascript recognition process automatically reads a check s payee line information and cross-validates it with data found in a Check Issue File. Through its automated recognition and superior performance, Parascript s Automated Payee Match System for Positive Pay assures significant reduction of check fraud, as well as greater accuracy and efficiency in Positive Pay processing. For additional information about Parascript s Automated Payee Match System for Positive Pay, please contact info@parascript.com or call Page 3

4 PART ONE Traditional Image-Based Positive Pay Like waves on the ocean, variations of fraudulent activity keep pounding the shores of the banking industry. The most prevalent problem...centers on check fraud... 1 Federal Bureau of Investigation Industry analysts acknowledge a Positive Pay system as a company s best line of defense against check fraud. Through Positive Pay, a financial institution and its customer work together to identify and verify items presented for payment. Steps 1 through 4 show how a traditional imagebased Positive Pay system works. 1. On a daily, weekly or monthly basis, the customer electronically transmits to the financial institution a list of all checks issued by the customer. (Check Issue File) 2. The Check Issue File typically contains each check s number, date and amount. 3. The financial institution compares checks received for payment with those listed in the Check Issue File. 4. If a check does not have a corresponding entry in the Check Issue File, the institution flags the check as an exception. Pending customer authorization, the institution withholds payment on the suspect check. In this manner, the Positive Pay process can detect a variety of invalid checks, including: Forged checks with duplicate serial numbers Voided checks presented for payment Checks with altered or invalid amounts Stale checks Traditional Positive Pay applications can also be integrated into a financial institution s branch system to detect fraud at the teller window or platform. When Positive Pay is extended from back-office to branch, a check presented for cash at a branch further mitigates check fraud. For example, the teller can compare not only the check amount and number, but also the payee line information on the check against the payee information in the Check Issue File. In this way, the teller can make a pay/no-pay decision quickly and accurately. Because Positive Pay eliminates the need to review each check, the financial institution can better control its exceptions process and reduce write-offs. On the downside, however, the typical Positive Pay system relies on manual processing and thereby incurs high costs of implementation and management. This is especially true when payee line matching is required as part of the Positive Pay process. 1 Check fraud: a sophisticated criminal enterprise, FBI Law Enforcement Bulletin, August 1996 Page 4

5 PART TWO Automated Payee Match Positive Pay Application Parascript s Total Recognition technology will automate the payee line matching in the Positive Pay process, which was heretofore not accomplished or accomplished manually in the backroom operation of the financial institution. Thus, Parascript s customizable automated recognition technology significantly reduces personnel costs and expedites Positive Pay processing. Free from the limitations imposed by other recognizers, Total Recognition technology accommodates any style or combination of: ; and Further, Total Recognition can acquire all data necessary for Positive Pay applications, including: Check number Date Amount Payee line information In this manner, Total Recognition will enable Parascript s Automated Payee Match System for Positive Pay. The system represents a significant advance over traditional Image-Based Positive Pay systems. Notably, Parascript s Automated Payee Match System for Positive Pay automatically compares (1) payee line information from checks with (2) payee line information contained in the customer s Check Issue File. The comparison process virtually eliminates fraud by determining the integrity of payee line information within checks issued by Positive Pay customers. In the past, such critical comparisons were either disregarded or relegated, at considerable expense, to manual verification operators. Parascript s Automated Payee Match System for Positive Pay may be initiated immediately after completion of Inclearing, Proof-of-Deposit, and traditional Image-Based Positive Pay processes. Other benefits include: Increased revenues from Positive Pay service Automatic recognition of more business check information Increased data-validation on business checks Decreased fraud due to payee line alteration Figure 1 shows a diagram of Parascript s Automated Payee Match System for Positive Pay functions. Note that Parascript s Automated Payee Match System for Positive Pay can be customized to interface with all types of accounting system software and existing Positive Pay systems, processes and time requirements. Page 5

6 Check Issue File: Customer Account Number Check Number Date Check Amount Check Payee Name Traditional Positive Page Matching Procedure Passed Matching Procedure Payee Match File: Customer Account Number Check Number Date Check Amount Check Payee Name Parascript Payee Name Recognition of Check Image Recognized Match Check Image Payee Name To Recognition of Check Image Match Matched Check File Customer Account Number Check Number Date Check Amount Payee Name Positive Match Flag Unrecognized Mismatch Statistics File Unrecognized Payee Name Mismatched Payee Name Exception File Payee Match Application Output Figure 1. Diagram of Functions Parascript s Automated Payee Match System for Positive Pay Depending on the customer s needs and requirements, Parascript s Automated Payee Match System for Positive Pay can be customized for your specific needs in different configurations: Recognition software for Payee Match Positive Pay solution. Recognition software for Payee Match Positive Pay solution and keying tool for manual repair/verification. Full Payee Match Positive Pay solution, including the recognition software, keying tool for manual repair/verification, Exception Handling System, hardware, and system software with custom architecture. Can be customized for your specific environment. Page 6

7 PART THREE The Application at Work The main inputs for Parascript s Automated Payee Match System for Positive Pay are (1) a frontside image of the check and (2) a Check Issue File containing all necessary information (in ASCII format) associated with the check image. The Check Issue File may include data such as customer account number, check ID, check number, check amount and check issue payee name. The Check Issue File includes only those checks that passed the matching procedure in previous stages of the Positive Pay process (that is, checks with verified check numbers and amounts). Parascript s Automated Payee Match System for Positive Pay uses Total Recognition technology to read payee line information from a check image. The system then matches the information with corresponding data in the Check Issue File. A successful match indicates a 100 percent coincidence between the payee name read from the image and the data contained in the Check Issue File. Matched Check File Each successful match results in the creation of a record in the Matched Check File which contains (1) data from the original Check Issue File (with or without the check image), as well as (2) a Positive Match Flag indicator and (3) a Recognition Confidence Value associated with the matching process. Exception File An Exception File record is created for each mismatched or unrecognized Payee Name. The Exception File contains (1) both the image and data content of the original Check Issue Match File, (2) a Mismatched/Unrecognized Flag indicator, (3) the recognized Payee Name and (4) the Recognition Confidence Value. The Exception File can be used by the financial institution and/or its Image Positive Pay application for offline visual verification. In addition, the Exception File can be used by the Parascript Exception Handling System. Statistics File The Parascript application also issues a daily Statistics File intended to monitor recognitionmatching as well as surface upstream problems with check-image creation. A Statistics File can be created for each Positive Pay customer account. The file includes (1) the total number of check images processed, (2) the number of positive matches, (3) the number of mismatches, and (4) the number of unrecognized payee names. In addition, the Parascript application compiles weekly and monthly Payee Match reports based upon daily activities. The information is available in both numeric and graphic form. Page 7

8 Exception Handling Check images that do not pass the payee line matching process are routed to the Exception Handling System. (Parascript can provide the financial institution with all necessary tools to execute the exception handling process.) Suspect check images are displayed on a screen, and an operator performs final check-image visual verification and reconciliation. If the Parascript Payee Match Positive Pay Exception File processing system is used, the system can archive the Positive Pay Exception Files for a minimum retention period of one week. The files may be used for systems support analysis. Custom Configurations Parascript will customize its Automated Payee Match System for Positive Pay in any configuration required by the customer. For example, it may be restricted only to the Automated Payee Match System for Positive Pay software. If so desired, Parascript can provide all required hardware and system software as a part of an Automated Payee Match System for Positive Pay. This approach ensures redundancy in hardware architecture and allows the customer to exclude any single point of failure. For more information about Parascript s Automated Payee Match System for Positive Pay and Total Recognition, please contact us. info@parascript.com Phone: Thank you for your interest. We look forward to working with you. Page 8

9 ABOUT PARASCRIPT, LLC Parascript traces its origins to Moscow, Russia in 1976, where a brilliant young computer scientist, Dr. Shelya Guberman, first proposed the concept of software that could read cursive handwriting. Soon fellow scientists began to explore and develop his ideas and, in 1985, entered a Russian/American joint venture focused on computer recognition of handwriting. In 1996 the venture s Parascript division became a separate company, Parascript, LLC, located in Boulder, Colorado. Today research and development, sales and marketing, technical support and administration are headquartered at Parascript s corporate campus in Boulder. We also maintain research and development offices in Sunnyvale, California and Moscow, Russia, as well as field sales offices nationally. Parascript, AddressScript and FieldScript are registered trademarks of Parascript, LLC, Total Recognition and CheckPlus are trademarks of Parascript. Copyright 2001 Parascript, LLC. All rights reserved. No part of this document may be reproduced or transmitted in any form, by any means without the prior written permission of Parascript. Page 9