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Articles Check It Out!History of the Common CheckWe all take it for granted now, but prior to the 1950's, checks were a convenience afforded to only a small percentage of bank customers. Most people used banks for savings and paid for goods and services with cash. People bought locally and purchased money orders when making the rare payments by mail. As the country grew and individuals prospered, people moved away from small towns and started purchasing goods further from home. As a result of these dramatic societal changes, checking accounts became a logical convenience for an increasing number of people. The banks had to adapt to meet this new demand. As the number of checking accounts grew, banks began experiencing difficulties related to the number of checks they needed to process each month. Early attempts to streamline these bottle necks included "Sort-A-Matic" and "Top Tab Key Sort" manual check handling systems. The Sort-A-Matic provided 100 metal or leather dividers numbered 00 through 99, each check to be sorted would then be placed into a corresponding divider based upon the first two numbers of the account. This process was then repeated for the next two digits of the account number, etc. and when completed the checks would be sorted. Checks using top tabs had small holes punched in the tabs to indicate the one's, ten's, hundred's, etc. digits. By placing a long metal "key" through the holes in the tabs, all the checks with a corresponding 100's, 200's, 300's, etc. could be pulled. Then this would be repeated for the 10's, 20's, etc., until all the checks were sorted. There was even a marketing controversy at the time concerning whether the holes should be round or square, with the square hole the ultimate victor. Both were effective but, as you can imagine, quite slow. Later, mechanical sorting, using "punch card" style checks was developed. These were much improved but also costly to produce and not at all suited for the mass market because of the cost of punching the holes and the problem of damaged or obscured holes causing a missorting of the checks. Fortunately, computers were beginning to move out of the laboratory and into business. Sorting and matching are tasks that computers do extremely well and therefore check processing seemed a natural application. Stanford University and Bank of America made the first successful attempts at further streamlining this process. Magnetic Ink Character Recognition, commonly known as MICR, was selected by the banking industry as the standard for machine processing checks. This technology relies upon the interpretation of a unique magnetic wave form given off by characters printed with ink containing iron oxide. When checks are received at the bank to be processed, they are first put onto a track and pass through a magnetic field with each character receiving a magnetic charge. This is very much like a tape cassette being recorded. The magnetic ink retains this charge, allowing the read head, which comes next in line, to determine the character type, somewhat like data stored on a floppy disk, although less permanently. The reading is actually done based largely on character widths. Once the MICR standard was established, the check sorting bottle neck was resolved, and banks could market checking accounts to all of their customers. Very quickly thereafter, this banking service saw dramatic growth as consumers and businesses alike took advantage of the new, safe and cost effective way of paying the bills. Production of checks became more specialized with the new MICR standards. Specialists improved production methods by producing multiple orders from a single plate. This is termed multiple-up or ganging, and provides an amortization of the high setup costs associated with traditional wet ink printing. As PC's became more common and affordable, and software improved, computer users have automated many mundane tasks, including check writing for small business and home users as well as major corporations. Add special computer checks to the check printer's menu. Printing these short runs using traditional production methods (plate preparation, press wash-ups, color and MICR ink mixing, paper loading…) means high set-up costs. And unfortunately for the small business and home computer user, this makes the price of software compatible checks relatively high and neither the check vendor nor the software developer is motivated to find a less costly method of delivery as they often bundle their services together, requiring the software user to buy, "official" forms and checks from just one source. Fortunately, electronic publishing and non-impact printing technologies have become available in the specialized areas of MICR printing. New, very fast, non-impact printing systems can produce MICR documents. Being computer controlled, most of the traditional MICR printer's setup costs are eliminated and no stock is wasted when changing jobs. These savings can be passed on to the end user, resulting in computer check pricing comparable to personal check costs. Now, very small business and individuals may enjoy the convenience, accuracy and professional image of printing their checks with their computer's printer but not pay the high prices of the past. Proponents of electronic bill paying have been saying the check is dead for almost 20 years. While they might ultimately be right, the banking industry has pushed Electronic Funds Transfer (EFT), Automated Clearing House (ACH) and Debit Cards for years and have had little success. Considering the flexibility and control individuals and organizations have when using checks, and the huge investment the banking system has in MICR processing equipment, it is reasonable to conclude that the check is going to be around for a long time to come. Mark Williams is from COMPUCHECKS USA. A software compatible computer check vendor providing state-of-the-art checks in small quantities at affordable prices. For information call 1-800-798-4452. |
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