Digital Transactions Authoritative, insightful and timely information for payments professionals
As the fifth anniversary of the Check 21 law draws near, the volume of paper substitute checks created by the law is in a free fall, recent data show. That, experts say, indicates the law has successfully paved the way for fully electronic clearing of check images. The number of substitute check items, or image-replacement documents in Check 21 lingo, totaled 160.5 million in June, down 43% from 283.3 million items in June 2008, according to the latest statistics compiled by the Electronic Check Clearing House Organization (ECCHO). The Dallas-based rules-setting organization for image exchange says IRD volumes peaked at 310 million items in October 2007, which means June's volume represents a 48% drop. Congress passed Check 21, formally, the Check Clearing for the 21st Century Act, in October 2003, and it took effect Oct. 28, 2004 as a way to keep the check-processing system working in the event of a serious disruption that prevents paper checks from getting from depository to paying banks. That happened when planes were grounded for days after the Sept. 11, 2001 terrorist attacks, and that disaster was a major impetus for Check 21. The law did not mandate image exchange; it only required that all financial institutions accept properly formatted IRDs created from images of the original check. But entrepreneurs at banks large and small as well as processors and tech companies saw the law as an incentive to encourage all banks and credit unions, especially reluctant small ones, to add image-accepting capabilities, sources tell Digital Transactions magazine for an upcoming story about Check 21's fifth anniversary. “The success of image exchange really is a direct derivative of having Check 21 in place,” says David Walker, ECCHO's president and chief executive. Other ECCHO data also trace the steady growth of image exchange. The tally of routing-and-transit numbers (R/Ts), a proxy for the number of financial institutions receiving check images, hit 19,170 in June, up 25% from 15,324 in June 2008. The June 2009 R/Ts represent 14,173 receiving institutions, or about 89% of all U.S. institutions, ECCHO says. Image exchange items received totaled 1.15 billion in June, up 34% from 852.5 million a year earlier. In the same period the average number of images received per day grew 28% to 52.1 million, or 71% of all transit checks, from 40.6 million. The combined dollar value of image and IRD items received rose 7% to $1.56 trillion in June from $1.46 trillion a year earlier. ECCHO compiles its numbers from the national image-exchange networks and settlement services, including the Federal Reserve, The Clearing House Payments Co. LLC's SVPCO service, and the National Clearing House Association, which settles for a number of networks, including Endpoint Exchange and Viewpointe Archive Services LLC.
