In our most recent Softec meeting we were treated to a
discussion and demonstration of how technology is helping make paper records
more accessible, easier to transport, more disaster-resistant, and more
environmentally friendly. In the banking
industry, the same thing is happening with the checks you write. In fact, these days the paper check you write
to pay the mortgage, your water company, or even your teenage babysitter may
cease to exist just moments after they receive it!
Up until early last decade, the tens of billions of paper
checks written in the United States were settled physically. Each bank would bundle up their checks and
ship them in trucks and airplanes either to each other or, mostly, to the
Federal Reserve. The Federal Reserve
would then sort them out and send them (again by trucks and airplanes!) to
their originating banks. As recently as
2000, each
weeknight the Fed made nearly 200 flights to move 23 tons of checks with a
face value of $13 billion among 45 endpoints and five hub cities! The delays caused by the grounding of all air
traffic after 9/11 drove home the point that physical transport of all this critical
paper was inefficient and prone to disaster.
Now, practically all checks are settled as electronic images. In October, 2004, the Check 21
Act removed legal barriers to the digital settlement of check images, and technology took it from there. Paper went from 100% of
check volume going through the Fed to just 1% in less than 6 years.
And the Fed now has only one paper check processing site. It's in Cleveland,
in case you're planning a trip.
What does all this mean to you? Well, the parts some people grumble about are
that checks are clearing faster (no more playing the float) and we can't get
our original paper checks back from the bank anymore. But the benefits are enormous. With a small desktop check scanner, many
businesses are using remote deposit capture software to make all their deposits
online, skipping daily trips to the bank.
Others are scanning checks right at the cash register and shredding them
or handing them back to the customer.
These companies get their money faster and much more conveniently, with
less opportunity for errors or fraud. Energy savings from not having to fly planes all over the country have been dramatic. And
the benefits aren't limited to businesses. Some
institutions are experimenting with technology that lets consumers deposit
checks by taking pictures of them with their smartphones!
Paradoxically, all this technology to help settle paper
checks electronically has made it easier to keep using them just as the
industry had hoped to kill them off. But
with the increasing popularity of electronic funds transfers, online bill
payment, and debit cards, the volume of checks written will continue to decline
over time and your kids or grandkids may never even see one.