Now, here we are in the 21st century, and the banking system remains full of paper checks. However, there has been progress.



That's because banks have managed to push a lot of paper out of the banking system by effectively “electronifying” the clearing and settlement process.

It's been great for the banks. Because of new product opportunities like remote check capture (RDC), banks have been able to break down remaining barriers to nationwide deposit gathering. Banks can now legally use remote check capture (RDC) to process paper checks electronically.

However, getting bank branch personnel to sell remote check capture hasn't proved easy. U.S. Bancorp, parent company of Elavon (the card acquirer formerly known as NOVA Information Systems), has 2,400 branches that would seem ideally positioned to sell services like RDC. But building on that network to reach small business customers isn't easy.

“If we could get our branch personnel to lead with remote deposit when a small business owner comes to open an account, we could potentially have 10,000 new leads a month,” said Beth Blaisdell, Senior Vice President at Elavon.

Boston-based consultancy Celent, LLC estimated there are 14.5 million small businesses that are prime candidates for RDC.

Millions of small merchants accept credit cards today—that are prime candidates for RDC services. These are business owners who actually take check deposits to their local bank branches every day.

Federal check law provides a 45-day period for consumers to contest transactions; this applies whether the check is cleared as paper or as an electronic check. Consumer EFT law, as implemented by the Fed's Regulation E, provides 60 days from the receipt of the statement containing the suspect transaction.

So, depending upon when in the statement cycle a transaction hits, it's entirely possible that it could take almost 90 days for an account holder to dispute a check payment that has been converted to an automated clearing house (ACH) transaction.

Most experts believe that ACH check conversion has likely peaked. The benefits of clearing checks as electronic replicas of the paper generally outweigh the ACH option (reduced fraud because of the extra time allowed to dispute ACH conversions).

According to NACHA—The Electronic Payments Association, the most popular ACH check conversion application today is accounts receivable entry (ARC), which was used to clear 2.66 billion remittances that started out as checks last year. Just fewer than 4.2 million checks were back office conversion (BOC) items. BOC is the most recently introduced ACH format.

The Fed reported last year that banks settled 30.6 billion checks in 2006. About 40 percent of all interbank checks were digitized and cleared electronically. And electronic checks networks are charting triple-digit growth in dollars cleared so far this year, compared to 2007.

So, it looks like the future is more electronic check products.