What is involved in Check21’s processing services?
Answer by Faisal Khan:
Check21 (as it is called in the US), is essentially a cheque truncation system and methodology. Other name that is used is remote deposit capture.
Rather than the physical paper cheque traveling to various places in order to be cleared, a cheque truncation system will take digital copies (i.e. photographic snapshots) of the front and back of the cheque. Specialized cheque scanners are used for this purpose:
Example of a Canon CR55 Desktop Scanner.
The scanner will also read the MICR (Magnetic Ink Character Recognition) Code on the cheque (the computerized numeric code at the very bottom row of the cheque):
In addition to this, the scanner will read the LAR and CAR. LAR or Legal Amount Recognition is the amount written in words. This is the legal amount of the cheque. The CAR or the Courtesy Amount Recognition is the numeric amount "2.56" in the example above, that is written in the box. Should there be a discrepancy between the LAR and CAR, LAR would prevail.
In addition to the MICR Code, LAR/CAR, other pieces of information are stamped on the digital image (this varies from territory to territory),
- Scanner Number
- Scan Station Number
- OK image code
- Station of Capture
- Depository Institution Name
- LAR/CAR amounts are Stamped
- ABA/Routing #
- Check #
- Account Number
- Name as read on the cheque (optional)
- Pay to (Optional)
The input process varies depending in which country you are, but the basics of any scan is something like this:
The output file is something like this:
The file is then sent forward for onward processing and the image is now the cheque, with the paper cheque having been truncated. Specialized software & network connectivity between/within the banks and processors allow the movement of such a file and its onwards processing and payouts, etc. In the US this is the ACH network. Information retrieved from the scan is then populated into the ACH file for processing by the ACH processor.