What does "Straight Through Processing" mean and why is it important

Straight Through Processing (STP) is the ability to receive and process transactions end-to-end utilizing an electronic and automated system without intervention.

Nearly all banks have implemented some form of image technology in place of traditional paper processes

Business case benefits associated with STP include:

• Elimination of possible processing delays due to inefficient and/or manual operation
• Acceleration of clearing by reducing the amount of time spent processing transactions
• Minimized operational errors by reducing or eliminating the number of touch-points and exception processes
• Reduction of transaction processing costs associated with staff, inefficient manual operations

Day 1 

Prepares unencoded deposits from branches, internal departments, vault, ATMs, corporate deposits, etc. for the capture process. General steps would include:

• Encode amount and missing MICR information
• Balancing - Verify transactions from branches, corporate depositors, ATMs, vaults, internal departments, etc. are in balance.
• Create deposit adjustments for customer and/or internal departments as needed to balance 

Process that reviews work that has already been encoded, either by Proof & Encoding staff or pre-encoded by customers, and adds internal control documents to prepare for high-speed or low-speed capture process.

• Proof & Encoding work: Already in trays and balanced with any backup documentation removed when delivered to Capture/Sort
• Customer pre-encoded work: Encoded and balanced at the customer location and delivered to the back office separately from unencoded work.
• Frequently these are corporate deposits and correspondent cashletters
• Customer paperwork, tapes, totals, other backup documentation removed from batch and retained with batch for use on Day 2 as needed
• Match physical checks delivered to cashletter listing for accuracy
• Settlement account identified and credit inserted into batch
• Placed in trays then taken to Capture/Sort for sorting and balancing
• Inclearing work: Usually delivered in secured bags with checks wrapped by bundle and includes cash letter listing
• On-us cashletters
• Match physical checks delivered to cash letter listing for accuracy
• Settlement account identified and credit inserted into batch
• Placed in trays then taken to Capture/Sort for sorting and balancing
• Special sorts: May be delivered to the bank encoded or unencoded, but are identified and separated from the work-stream in order to be processed differently. May include:
• ControlledDisbursement
• Lockbox
• “SpecialHandling” customer deposits
• Large dollar item review

Process where the MICR line is mechanically read by various types of capture equipment (e.g.; IBM 3890, 7780/iTRAN, others) to capture the MICR data information, segregate on-us items and control documents, and sort all others according to transit destination. Basic steps would include:

• Capture MICR data and sort items based upon routing criteria (routing number on the item plus sort pattern requirements)
• Control documents are segregated for internal purposes
• On-us items are segregated for additional fine sorting later for bulk file/statementing purposes or for exceptions processing on Day 2
• Endorse backs of items with BOFD indorsement or subsequent indorsement based on the type of work
• Microfilm or image capture the fronts and backs of item 

Process where items that could not be processed in the initial capture process are repaired to attempt to capture the MICR data information in a subsequent process. Generally includes:

• Strip, re-encode and low speed capture of items unable to be processed via the initial capture process workflow
• Re-encode MICR data on items which read incorrectly or were encoded incorrectly
• Re-route items that require additional investigation to Exceptions staff for next day processing 

Balancing 

Control process that balances work that has been captured in order to verify cash letter or entry totals. Basic steps would include:

• Review of financial totals for each transaction, batch and/or entry to ensure accuracy
• Research any source vs. captured differences and resolve as appropriate
• Research any transaction outages, make corrections or adjustments as needed before sending customer information for posting 

Process of preparing and releasing cash letters for collection to other financial institutions. Generally this would include:

• Preparation of items for dispatch that have completed the capture process
• Ensure items are routed correctly to external financial institutions based upon captured MICR information
• Ensure items are dispatched according to schedules determined by agreements and Float Management scheduling 

Bulk File 

A filing and temporary retention system for on-us items

• At the completion of all Day 1 capture, balancing, and posting processes each day, an additional sort process is initiated to re-sort all captured on-us items from the previous processing day into the appropriate cycles associated with statement cut-off date needed for statement enclosure
• Retrieval and insertion into customer statements
• See Statements in Day 2 Paper section 

Part of the End of Day processing functions for check operations area

Includes sending all information about items processed that day to DDA system to attempt posting to customer accounts 

Facilitates the exchange of funds between banks for the value of cash letters sent and received

• Each bank has its own process for assigning exchanges to internal general ledgers based upon its unique clearing relationships and internal requirements
• Rules for what types of entries may be made (such as whether adjustments and/or returns may be included) and scheduled times by which all settlement entries must be completed vary based on the agreements and clearing house rules that governed a particular exchange of cash letters
• Ensures the inclusion of entries for forward clearing, inclearing and returns cash letters as well as adjustment entries for each bank-to-bank relationship
• Confirms that all settlement totals accurately reflect the actual value of items sent and received
• Confirms settlement totals for items sent and received in Federal Reserve exchanges via a parallel but segregated process
• Adjustments made as needed to settlement accounts for missing work, out of balance cash letters, etc.
• Ensures that the bank funding for all external settlement accounts accurately reflects the confirmed value for those cash letters and is completed each day by the times dictated by the Federal Reserve 

Compares internal control totals for items captured to credit and debit entries reflected in general ledger accounts. While the Balancing area performs a similar function on Day 1 prior to posting for both customer and internal accounts, Reconciliation focuses on control totals after posting primarily for internal accounts. 

• Verification that all incoming and outgoing cash letters were captured and settled each day by comparing internal general ledger capture totals to settlement account entries
• Ensures that all debit and credit entries to general ledgers balance and offset each day
• Collaboration with internal departments to resolve any differences according to internal accounting procedures 

Performs a variety of functions based upon the bank’s captured item trends and specific product account requirements.