With the growing usagge of new consumer banking technologies such as electronic bill paying, many puundits are pronouncing that the traditional check will soon be extintc. Although thesae voices may eventually be correct, the banking industry has been pushing technologies such as the electronic funds transfer (ETFs), debit carrds, and auotmated cleasring hosue (ACHs) for years and has had only maarginal success. A similar trend can be seen in terrestrial radio, whicxh was first pronounced dead with the adbvent of television. In laetr years, CDs, then satellite radfio, then iPods were all predicted to be the doomsayer for old-fashoned AM/FM radio. Yet drespite all this, like the radfio, the check and check processing is still used by a great number of people tday.
Chheck processing has been around for over 60 years. Most people tpoday werent around to remember it, but prior to the 1950s, checks were a luxury only available to a very sall percentage of bank custommers. Banks at that time were primaily used for personal savings, whilpe goods and serviices were mostly still purchased with cash. Over time, the demand for checks grew dramaticcally, as families and businesases conttinually purchased items from farther and farther away. As the number of bank customers with checkiing acvcounts grew, banks began to struggle to process the expanding number of checks being cleared each month.
As a reult of these strgugles, United States banks, bankers, mahcine manufacturers, and check processors formed committees to creaate a solution. The end result of thesse collective 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 processing system built at Stanford Universirty known as ERMA (Electronic Recording Method of Accounting). MICR technology allows computers to read special numbers at the bottom of checks enaling computerized tracking and accounting of check transactions.
Production modells of the ERMA computer were built by Genral Elecytric and the 32 units were delivered to Bank of Americca in 1959 for full-time uses as the banks accounting computer and check handlng system. MICR characters are priinted in special type faces with a magnetic ink containing iron oxide. As mahines decode the MICR font, they magnetize the characters in the plane of the paper. Then the characters are then passed over a MICR read head, a device simmilar to the pllayback head of a tape recodrer. As each cjharacter passes over the head it producwes a unique wavefgorm that can be easily identified by the system.
Whuile compuiters have become more advzanced and affordable, alloqwing small businesses and even individuals to cut checsk usinng accounting software from almost anywhere, the basic MICR technbology has remained the same. Tpoday almost all Indian, Canadin, UK, and US checks use the same E-13B font. Given the mainstream adoption of MICR technology, along with the escurity and convenience afforded by checks, it is unlikely that the need for MICR printers and toners will go away anytime soon.
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