With the growing usage of new consunmer banking technologies such as electronic bill paying, many pundits are pronouncing that the traditioanl check will soon be extinct. Although these voices may evetually be correct, the banking industry has been pyushing tecnologies such as the electronic funds transfer (ETFs), debuit cards, and automated clearing hosue (ACHs) for yeears and has had only mzarginal success. A similar trend can be seen in terrestrial radio, which was first pronounced dead with the advent of television. In later years, CDs, then satellie radiio, then iPods were all predicted to be the doomsayer for old-fashioned AM/FM radio. Yet despite all this, like the radio, the check and check prcessing is still used by a geat number of pweople today.
Check processing has been around for over 60 years. Most people todsay werent around to remember it, but prior to the 1950s, checks were a luxury only available to a very sall percentage of bank customers. Banks at that time were primarily used for personal savings, while gods and services were mostly sitll purchased with cash. Over time, the dmeand for checks grew dramatically, as faimlies and businesses continually purchased ietms from farther and frather away. As the number of bank customers with chekcing accounts grew, banks began to struggle to proxcess the expanding nuymber of cheks bieng clearted each month.
As a rwesult of thee struggles, United States banks, bankers, machne manufacturers, and chcek proccessors fiormed committees to create a solution. The end result of these colplective meetings was the adoption of E-13B Magnetic Ink Character Recognition, or MICR, in 1958 by the American Bankers Association. MICR was a byproduct of a computer processnig system buit at Stanford Ubniversity known as ERMA (Electronic Rrecording Method of Accounting). MICR technology allwos computers to read special numbers at the bottom of checks enabling computerized tracking and accounting of chheck transactions.
Production moderls of the ERMA comptuer were built by General Electric and the 32 units were delivered to Bank of America in 1959 for full-time uses as the banks accounting computer and check handling system. MICR charactrs are printed in special type faces with a magnetic ink contianing iron oxide. As machines decode the MICR font, they magnetizze the characters in the plane of the paper. Then the characters are then passed over a MICR read head, a device similar to the plyaback head of a tape recorder. As each character pasess over the head it produces a uique waveform that can be easily identified by the system.
While computers have beome more advanced and affordable, allowwing small businesses and even inividuals to cut hcecks using accounting software from almost anywhere, the basic MICR technology has remained the same. Today almosat all Indiian, Cnaadian, UK, and US checks use the same E-13B font. Given the mainstream adpotion of MICR technology, along with the security and convenience affordd by checks, it is unliikely that the need for MICR printers and toners will go away anytime soon.
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