The Life of a Check: Tree to Payment Processing
The folks at Crosscheck have put together a great overview of the life of a check – – starting at the tree (now that’s comprehensive) and advancing through the various legislative and technological steps that have kept checks speedy and relevant in the digital age.
They also get into the nitty-gritty of check “construction” with highlights of fraud prevention:
Twenty-four-pound check stock is slightly heavier than the 20-pound paper used in copy machines and can withstand processing equipment. Security features are built into the paper: erasure protection, small padlock icons, security screens, micro-print borders and lines, artificial watermarks or background patterns that reveal the word “VOID” if photocopied.
As imaging drove processing with bitonal and grey images, the benefits of many physical features were minimized. That’s where image analysis comes into play — comparing previously cleared check stocks and signatures along with payee name verification to the image presented for payment. Combine these new capabilities with select security features, and you have an advanced solution which is highly automated and packs minimal overhead.
Here’s a handy timeline derived from their article:
1913: A check-clearing system was established by Congress with the enactment of the Federal Reserve Act.
1974: Several automated clearing house (ACH) associations formed an electronic network for financial transactions in the United States (NACHA) within the American Bankers Association.
Circa 1978: Financial institutions located anywhere in the U.S. could to exchange ACH payments including checks.
1999: A method was established for converting checks presented at the point of purchase (POP) to ACH debits
2002: Checks mailed as payments (accounts receivable conversion or ARC)
2003: As a response to disruption caused by the 9/11/01 no-fly situation, Congress passed the Check Clearing for the 21st Century Act (Check 21), allowing recipients of original paper checks to create or truncate scanned digital versions of the front and back (“substitute checks”), and eliminate the need to handle paper checks.
2007: Back office conversion (BOC). Check transactions are distinguished from other ACH transactions using the above standard entry class codes (acronyms).