The Impact Of Check 21

Image capturing technology is becoming an integral part of many business environments, particularly among the banking and financial industries. The Check 21 Act, which became effective in 2004, is having a tremendous impact on the market. Check 21 is designed to foster innovation in the payments system and to enhance its efficiency by reducing some of the legal impediments to check truncation. The law facilitates check truncation by creating a new negotiable instrument called a substitute check, which permits banks to truncate original checks, to process check information electronically, and to deliver substitute checks to banks that want to continue receiving paper checks. Along with advanced image capturing technologies and remote deposit capture (RDC), Check 21 is modernizing the nation's payment processing system by reducing existing obstacles and increasing bank and merchant benefits.

Before Check 21 was enacted, checks were physically transported to the banks that issued them for payment clearance. However, any "hiccup" in the transportation, be it a weather-, mechanical-, act-of-God-, or terrorist-related event, could delay check clearance. Check 21 legislation was first crafted in 1998 and was moving slowly through the approval process until September 11, 2001. The events of September 11 reinforced the need to develop better technology that allowed the "movement" of checks with minimal possibility of interruption.

CHECK 21'S CURRENT STATE OF ADOPTION
Check 21 has transformed the financial industry in a very short period. Financial institutions are developing more opportunities and implementing new programs that will enable merchants to take full advantage of electronic payment processing options, such as 24-hour banking and RDC. It has been reported that RDC is used by nearly 50% of financial institutions. This shows the success of electronic check capture. Financial institutions are maximizing the potential benefits of Check 21 by building upon the three flagship advantages of RDC — saving time, saving money, and increasing cash flow.

These institutions are also able to implement customer-facing programs that increase workflow efficiencies, based on the following benefits received:

•  Increased funds availability (decreased float time) with timely banking options
•  Consolidation of accounts
•  Improved accounting business processes
•  Viewing account balances in real time
•  Reduced transportation costs
•  Greater security, including quicker detection of fraud
•  Green opportunities
• Cost savings

The necessity to employ programs supported by Check 21 with obvious end user benefits has taken precedence in the financial world.

UNDERSTAND CHECK 21'S END USER IMPACT
Check 21 has introduced a plethora of technological opportunities by permitting the acceptance of image replacement documents (IRDs), which are seen as legal substitute checks. Technological opportunities include a significant increase in the use of scanning devices, such as Canon's CR-series check transports and DR-series scanners.

Check 21 affects a variety of end users, including bank branches that transmit daily work to main operating centers and single merchant account holders sending checks electronically to their banks. For small- and home-office (SOHO) end users, check capture as part of electronic payment processing can be done on conventional office equipment, enabling "stay-at-home-banking capabilities." RDC has the potential to thrive here, since many individuals in this segment rely on user-friendly and efficient workflows to increase entrepreneurial productivity.

Check 21 has strengthened decentralized check image capture and has fostered the growth of remote deposit and merchant capture services. By eliminating the requirement to physically transport checks, Check 21 has streamlined the financial processes for both end users and institutions utilizing advanced digital imaging technology.