Academic journal article ABA Banking Journal

A New Era Begins: Making the Transition to a Revised Check Processing Scheme

Academic journal article ABA Banking Journal

A New Era Begins: Making the Transition to a Revised Check Processing Scheme

Article excerpt

When the Check Clearing for the 21st Century Act--or Check 21--takes effect on October 28, it will be the start of a new era in check processing in which image will transition from bit player to ensemble actor.

Of course, Check 21 isn't a mandate to image, as Y2K was a mandate to update systems. Yet it is a facilitator; and the spirit of the law is to encourage and facilitate the progression to a more efficient payment system in which electronics will supplant paper. In essence, the new law gives legal status to substitute checks called image replacement documents (IRDs), designed to be handled the same as a check. All banks are required to accept these check substitutes into their existing workflow.

The requirements of the new law are relatively few, and are clearly spelled out in a Check 21 Toolbox created by the ABA for member institutions (described in more detail on page 56.)

The opportunities opened up by the law, as well as the difficulties inherent in changing from the finely honed processes, procedures and infrastructure that has effectively cleared billions of paper checks for decades under the MICR based system are the subject of this special report.

As we'll show, bank executives, experts, and vendors are finding a way to map image-related schemes against traditional processes, and while all the details are far from completed, much of priming is already done.

All sorts of checks can be captured (though again, there is no mandate here): consumer, business, corporate, government warrants, U. …

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