History of Electronic Check Processing

Paper checks look nearly the same as they did during previous decades. However, the way businesses and banks process them has almost completely changed in just 12 years. Electronic check processing revolutionized this payment system by making it possible to convert paper checks into computerized transactions. It all began in 2002, when utilities started using information from checks to perform direct transfers.  

Early Days

A few companies benefited from a basic form of electronic check processing during 2002 and 2003. These firms gained permission to retain paper check images and account numbers so that they could initiate Automated Clearinghouse payments. The next major development took place when the Check 21 Act became law in late 2004. It enabled the banks involved in a transaction to supply each other with digital or paper copies of a check.

Rapid Growth

The Check 21 Act made it considerably easier for any business or bank to perform electronic check processing. If a customer's bank still wanted paper documents, the retailer's financial institution could use a scanned check image to create and supply a copy. Bankrate.com reports that computerized transactions surged by 54 percent between 2007 and 2009.


In the past, it was only feasible for banks or major businesses to scan checks and deposit them electronically. This changed when the first mobile deposit application appeared in 2009. It became possible for any individual to deposit paper checks by taking photos of them with a camera-equipped phone. Several national banks began to accept these transactions in 2011 and 2012, according to U.S. News and World Report.


Nearly all financial institutions now use electronic check processing when money moves between accounts at different banks. Meanwhile, increasing numbers of businesses handle bill payments or point of sale transactions electronically. They benefit from faster deposits and don't need to handle or transport physical documents.

Even though electronic check processing has significantly streamlined the check payment system over the years, there are still risks that go along with using it. Check fraud is a problem that many merchants deal with everyday, resulting in bank fines and lost revenue. Fortunately payment risk services allow these merchants to identify information on the status of personal and business bank accounts and verify the authenticity of a person's contact information from the paper checks that they receive.

If you’d like to initiate or expand your use of electronic check processing while reducing your risk, there are solutions. Look for a complete payment risk management platform, including verification and account authentication, consumer and business identification, and funds confirmation.  It is also important to understand the implementation process and the extent of the work required to integrate the solutions into your existing systems and workflow. Finally, make sure the network is real time and has the greatest accuracy and coverage available.


Wouldn't you like to take checks with the same ease and confidence that you feel when accepting debit or credit card payments? Our payment risk management services make this possible by reducing risk and increasing customer satisfaction with our fact-based real-time results. Coupled with our "Zero Pain" Integration means faster implementation driving immediate results. Please dial 866-918-2409 or contact GIACT to learn more.




1. Federal Reserve, http://www.newyorkfed.org/aboutthefed/fedpoint/fed03.html, http://www.frbsf.org/education/publications/doctor-econ/2012/april/check-processing

2. Deluxe, http://ww.deluxe.com/about-deluxe/deluxe-resource-center/checks-cards-and-electronic-payment/electronic-check-conversion

3. Bankrate, http://www.bankrate.com/finance/checking/happens-write-check.aspx

4. U.S. News, http://money.usnews.com/money/personal-finance/articles/2012/10/09/how-to-deposit-checks-with-your-smartphone