From the 90's to Now: The Evolution of Check 21

Key Bank created a video in 1995 describing the Day in the Life of a Check. This video serves as a reminder of just how far we have come. While hair styles were higher, perms tighter, shoulder pads larger and mullets longer, one thing the 90's financial industry was short on was the technology we enjoy today. Take a few minutes (4 minutes and 38 seconds) to watch this video and recall a time in the not-so-distant past. My apologies to anyone who was not transferred to another department or was unable to find another job after The Check Clearing for the 21st Century Act (Check 21) was signed into law.

In the early 90's, the definition of "easy" was drastically different from what it is today.  For example, members could  "easily" get a copy of a cleared check in just a few steps:

1. Call or stop in at your bank to request a copy.
   
   
2. The request will be routed to the Repro Department. An employee will key the check number into a machine that indicates what role of microfiche it's on.
    
3. Once the correct role and frame is found, the microfiche slide is printed, the appropriate check is cut out and mailed to the customer using first class postage.
   
   
4. In less than a week from the request, a copy of the cleared check is in your hands. Easy?

While advancements in internet banking have contributed to streamlining this process (for credit unions and members alike), it is the advent of Check 21 that deserves most of the credit for revolutionizing the process of handling deposited checks. Prior to Check 21, credit unions physically moved original paper checks from the bank where the checks were deposited to the bank that paid them in a rather inefficient and costly system. Not to mention that the process for a member depositing a check required a trip to an ATM or bank, and proof of the cleared check arrived in the monthly statement mailed to the member where the actual check was included.

Check 21 not only gave credit unions the ability to process checks electronic or paperless environment, it led to the mobile banking and remote deposit revolution. With new regulations, an image of the physical check is sufficient to process the deposit. For members, mobile banking apps now take pictures of the check, confirm amount and deposit information and transmit electronically to the credit union. That same image is then used by the credit union to submit for payment to the responsible bank or credit union where the account is held. For credit unions running advanced data processing systems, remote check deposits and in-branch check deposits can be combined in a single cash letter and duplicate deposits can be automatically detected.

If a receiving credit union or member requires a copy of the check, the financial institution can use the electronic picture and payment information to create a paper “substitute check,” reducing the cost of physically handling and transporting original paper checks. Of course, internet banking has taken this process paperless by allowing members to view check images on demand without involving credit union staff.

When Check 21 was first introduced, I doubt there was thought about how it might change the payments industry. More than likely the only thought was to reduce the cost in transporting paper. However, when innovation occurs the principle of creative destruction generally follows. There is no doubt the full extent this application has yet to be realized as technology continues to make payment systems, and how we use them, more efficient. Perhaps 20 years from now our children will be watching a video on a day in the life of a mobile deposit, and laugh at the complexity of it all... and the hairstyles.