Bringing Checks Into the 21st Century

 

Checks have long been an accepted form of payment - with a similar system in place even as far back as 321 BC in India. Essentially, a check comes in the form of a piece of paper detailing an amount of money that should be transferred from one account holder to another. On every check, the following four pieces of information are usually included:

  • The drawer: This is the name of the person or entity whose bank or checking account should be ‘drawn.’ In other words, this is the person who will be paying the money to the recipient.
  • The payee: This is the name of the person or entity entitled to be paid by the drawer the full amount shown on the check.
  • The drawee: Usually visible on the check, this is the bank’s name or other institution where this specific check can be presented for processing. 
  • The amount: This is the amount of money that the drawer intends to pay the payee. Usually, the amount must be written out in words as well as figures. 

As check usage increased rapidly during the 19th and 20th centuries, extra security measures were brought into place. These are still prominent features today, helping to make checks a very recognizable form of payment. 

  1. The drawer is required to sign the check for security reasons.
  2. The drawer is required to write the amount in words as well as numerically. 

The first point is quite self-explanatory, but why must the drawer write the amount in words and figures? The truth is that doing this prevents fraudulent acts from being committed by the payee when it comes to the check amount. If a drawer hands a check to a payee, the payee could manipulate the check before giving it to the drawee. If an amount is only drawn up numerically, an unscrupulous payee might like to add an extra ‘zero’ to the amount written by the drawer! Especially if you are a younger reader, look at this template of a check below to understand exactly how they work.

 

Credit: American Bank Checks

 

A Very Brief History of Checks

As mentioned, the first records of a system similar to check payments were in India from 321 to 185 BC. Commonplace in the Maurya Empire was an instrument called an Adesha - ordering the transfer of currency from one person to another.

Slightly more recently, ancient Romans and Persians employed similar documents or ‘contracts’ that mandated the transfer of money. Transitioning to more modern times, 13th century Venice pioneered a ‘bill of exchange’ that facilitated international trade without trading precious metals like gold physically. 

This concept spread fairly quickly across Europe, with ‘bills of exchange’ morphing into the type of checks we are more familiar with today by the 17th century. However, while checks peaked across the world in the 19th and 20th centuries, the 21st century has seen a significant decline in usage as electronic payment methods have become more commonplace.

 

How Can Checks Still be Relevant Today?

Despite the evident surge in electronic payment methods, checks can also evolve to become a valid payment method today.

  • Virtual checks have become a handy replacement for traditional paper checks. Instead of relying on banks and their processing fees, virtual checks are often processed digitally through ACH (Automated Clearing House). Virtual checks are an upgrade on the time-consuming paper checks and hold financial benefits over standard card transactions - especially smaller ones.
  • Mobile checks provide the security of processing a properly filled-out check, but without the hassle of needing to queue at the bank. You can simply take a photo of your check and upload it to a secure server provided by your bank. They will be able to process the funds into your bank account without you needing to leave home.
  • Laser checks are the perfect solution for businesses that need to deal with cutting checks. Avoid the lengthy process of acquiring pre-printed check stock and find laser check software that helps you put together a design, setup, and implementation in a matter of days. Laser checks can sync with standard software like Quickbooks each time a check is cut from your business account.

It is clear to see that the world of checks is still alive and kicking. Of course, contactless payment and bank transfers are more frequently used, but checks will not die overnight.