Check truncation

Check truncation.

To process payments faster and more efficiently, many banks no longer transport paper checks, but replace them with digital images -- called substitute checks -- that can be transferred electronically, in a system called check truncation.

When you receive your account statements, the bank may send you substitute checks in place of cancelled checks, each formatted on a separate piece of paper, with the words "This is a legal copy of your check" appearing next to the image.

Most banks destroy original checks once they've archived the substitutes. However, many banks send out either a line item statement or an image statement with photocopies of multiple cancelled checks on each page.

If you need to verify a payment, you can request a substitute check from your bank. There may be a fee for this service.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Indian Overseas Bank has selected Silver Bullet's Ranger API as its portability strategy for the check truncation software used for branch capture across IOB locations in India.
Indian Overseas Bank has selected Silver Bullet's Ranger[R] API as its portability strategy for the check truncation software used for branch capture across IOB locations in India, the company said.
And while Europe has moved away from checks, in the United States, technological innovations like check truncation and remote deposit capture have made it easier to use them, a development that has lessened companies' motivation to push toward electronic payments.
"BancorpSouth leads the nation in adapting technology for the check clearing for the 21st Century Act, which involves creating digital versions of original checks known as check truncation," Rollins said.
Coupled with the increase in check truncation technologies, such as business remote deposit capture, consumer/mobile RDC, envelope-less ATMs and emerging electronic capabilities, such as prepaid cards, mobile banking and P2P, and it is not surprising to see that teller transaction volumes are declining rapidly.
By combining innovative products and solutions from both organizations, users receive a complete foundation for Check 21 check truncation initiatives with built-in check image quality and usability features.
Still in its early-adopter stage, consumer RDC is beginning to grow like wildfire, and as with services such as ACH and check truncation, credit unions are leading the way.
The report objectives are to (1) determine the gains in economic efficiency from check truncation and evaluate the benefits and costs to the Federal Reserve System (Federal Reserve) and financial institutions; (2) assess consumer acceptance of the check truncation process resulting from Check 21; and (3) evaluate the benefits and costs to bank consumers from check truncation.
The Federal Reserve's role in promoting Check 21, a law that facilitates check truncation, is an example.
These 19 articles describe a wide range of applications of information technologies now applied, or soon to be applied in Indian banks, covering such topics as the opportunities available and the sustainability of Indian e-banking, technology for management, e-delivery, Internet banking, risk management issues, emerging technologies, the performance of Six Sigma, ongoing challenges, optimization of investments in information security, check truncation systems, and the tasks ahead.
Successfully implemented in 76 banks and 3 Central Banks in 5 countries, this pioneering solution actualized a fully electronic, same-day clearing cycle, with check truncation from the branch.