Abstract

The persistent success of checks as a principal means of noncash payment in countries such as the United States has resulted in efforts almost as persistent to make the collection of checks more efficient. Much efficiency can be achieved in terms of cost savings and speed of collection by the conversion of the paper check to electronic form at an early stage in the collection process, particularly where the banking system is fragmented, and multiple sorts of checks are now necessary. The magnetic ink characters on the bottom of the check are transmitted to the payer’s bank in place of the original check. This process is often called “truncation,” and is distinguished from the mere safekeeping of paid paper checks at the payer’s bank.