Future of Check Runs...

[ShyFlyGuy]

I'm currently in the position to buy a 135 operation with a bank run. At my bank (not the one that it flies for), they said they were going "online" in August and funds would be available immediately for deposited checks. Is this the end of the check runs? Anyone have an inside scoop? The operation also does people, but the check run provides much needed cash-flow. Thanks.

Let the rumor mill begin.

 

[labbats]

I thought that the law went into effect in November. I could be mistaken though.

 

[starcheck1]

I thought it was actually Octobter......but anyways....strap in because here we go.....

 

[Hotstarter]

I may be qualified to answer this... that's a first.

This is more a computer industry question than a pilot question. Well, before I was a pilot I was a computer programmer/analyst for two different computer software/hardware solutions companies for the banking industry for nearly 10 years. Then, I worked for a check carrying company for 3 years before moving on to fly bigger stuff. This is an over complicated, boring answer, but that said, here it is.

If you want more of a background regarding the legislation itself, nicknamed Check 21 and sometimes referred to as check truncation, you can e-mail me directly, but I'll avoid the politics of it for now. There's a bunch of stuff on the net about it already.

To make a long, long story very short, it is a matter of politics still whether checks will become a thing of the past. Basically the American Banking Association and the Consumers Union are the parties lobbying for and against the legislation (respectively). Yes, the legislation has been signed and a cutover date is planned for October 28th. Barring some miraculous political or legal manuever from the Consumer Union, this is the date the FRB will be ready to accept electronic Check 21 tranmissions from the banks.

What will this mean? Well, large banks will be the most likely to realize a profit from Check 21, at least initially. Some, not all, but some large banks will view this as a new competition, or at the least a new information technology budget problem. The smaller banks have fewer checking accounts, and more small acount customers, and will embrace this technology slower, if at all. Sooo, what does this mean?

Smaller banks are the ones that primarily use check carrying aviation services. The amount of check carrying business will probably be reduced. How much and how soon, no one knows for sure. I would guess that some type of reduction to begin by the end of the year, although how much is anyone's guess. Though, to reduce business at all for a check carrying company can have severe impacts as many of these companies run with a slim profit margin in the first place. Even large check carrying companies such as Flight Express, will have their bottom line affect in the long run.

As if any aviation company wasn't already a risk investment. I would have to advise you to lay out of any investment of this sort unless you have a seriously good offer (something close to total asset worth), or at least wait for a year or two until the industry sorts itself out a little.

Hope this helps.

 

[ShyFlyGuy]

My word....

That has to be the most compitent comment I've ever seen on this message board. There was not a single word in there about Pay-For-Training or anything! Thanks, dude. Your avitar is just wrong, but nice post. Thank you.

Shy

 

[100-1/2]

As of October 2004 the Federal Reserve will begin accepting Electronic Imaging of checks for processing, rather than Physical checks. The Fed is now running trials on the processing at several facilities like Cincinnati. Congress and the FRB have mandated within 36 months of the initial availability of "check Image Processing" (October 2007) to NO LONGER accept physical representations of checks. This is congruent with "Check 21" which was a manifested intent to streamline processing (to include already ongoing closures of processing facilities) and be fully electronic by the year 2008.

Most banks will opt for centrally locating this equipment and transport checks from their branches rather than outfitting every branch at considerable expense. Many smaller banks will not be able to compete under this additional financial strain and are destined for failure.

Overall, some flying will remain as it has, some will be modified and some will be eliminated. This is about as specific as anyone knows. Before October if anyone tries to tell you different, it is a scare tactic to worry you or get your goat, or both. Either way it ain't worth it. Just encourage these individuals to find better job security by moving onto the big leagues at Mesa, Colgan or some other fine outfit. More PIC twin/turbine/jet for the rest of us.

100-1/2

 

[208starcheck]

October is correct as far as when the banks can start. Who knows when each bank will start though.

 

[zuka]

web articles

http://www.federalreserve.gov/paymentsystems/truncation/default.htm

 

[ShyFlyGuy]

Hey, thanks man. That makes this all make sense.

Basically, it seems that there is going to be a substantial investment initially for each bank (ie. Bank of America, 1st Source, National City, etc.), but that the savings over the long term will be substantial enough that the transportation of checks as we know it will cease to exist. This does not look good for Homestar. I think I'm going to have to factor this into negotiations with my boss. Thanks again.

Shy

www.homestarruner.com

 

[FN FAL]

My word....

That has to be the most compitent comment I've ever seen on this message board. There was not a single word in there about Pay-For-Training or anything! Thanks, dude. Your avitar is just wrong, but nice post. Thank you.

Shy

It's compatant and avetar...and why is there a lady jumping out of a ruck sack in yours?