Digital Imaging Technology for Faster Cheque-Clearing

In a move expected to bring about an industry-wide shift away from traditional paper-based cheque-clearing, the Royal Bank of Canada recently announced its plans to implement digital imaging technology for cheques. Digital imaging of cheques, known as cheque truncation, involves capturing and storing electronic images of cheques in digital archives.   This method allows the original paper cheque to be disposed of at the early stages of the clearing process.   Since digital images can be retrieved in seconds, cheque truncation also reduces the time it takes for a customer to trace a cancelled cheque. In the US, the Check Clearing for the 21st Century Act was signed into law on October 28, 2003, and has prompted financial institutions to move towards cheque truncation.   The new legislation facilitates cheque truncation by establishing a new negotiable instrument called a "substitute check" and by permitting banks to truncate original cheques and process cheque information electronically.   To support cheque truncation, Canada will require similar legislative changes to provide official legal status to digital images of a cheque. For information related to digital imaging of cheques in Canada, visit: http://www.itbusiness.ca/index.asp?theaction=61&sid=53848#; or http://www.cdnpay.ca/news/presentment.asp. To learn more about the Check Clearing for the 21st Century Act, visit: http://www.federalreserve.gov/paymentsystems/truncation/default.htm. Summary by:   Nicholas Wong