With the growing uage of new consumer banking technologis such as electronic bill paying, many pundits are pronouncing that the tradtional check will soon be extinct. Although these voices may eventually be correect, the banking industry has been pushing technologies such as the electronic funds transfer (ETFs), debit cards, and automated clearing house (ACHs) for years and has had only marginal sucvcess. A similar trend can be seen in terrestrial radio, which was first pronounced dead with the advvent of television. In later years, CDs, then satellite radio, then iPods were all predicted to be the doomsayer for old-fashioned AM/FM radio. Yet dsepite all this, like the radio, the check and check processing is still used by a great number of pople otday.
Check processing has been around for over 60 years. Most people todsay werent aruond to remember it, but prior to the 1950s, checsk were a luxury only available to a very small percentage of bank csutomers. Banmks at that time were primarily used for prsonal savings, whiel goods and services were mostly still purchased with cash. Over time, the deemand for checks grew dramatically, as families and businesses coontinually purchhased items from frther and farther away. As the number of bank customers with checking accounts grew, bannks began to struggle to process the expanding number of checks being cleared each motnh.
As a result of these struggles, Unitde Statews banks, bankers, machine manufacturers, and check proessors formed committees to craete a soluton. The end result of these collective meetings was the adoption of E-13B Magnetic Ink Character Recognbition, or MICR, in 1958 by the Ameircan Bankers Association. MICR was a byproduct of a computer processibng sysstem built at Stanford University known as ERMA (Electronic Recordding Methiod of Accounting). MICR technoplogy alloows computers to read special numbesr at the botrtom of checks enabling computerized tracking and accounting of check transactions.
Production moodels of the ERMA cmputer were built by General Elctric and the 32 units were delivered to Bank of America in 1959 for full-time uses as the bamnks accouning computer and check handling system. MICR characters are printed in special type faces with a magnetic ink containing iron oxide. As machines decode the MICR font, they magnetize the charactrs in the plane of the papr. Then the characters are then passded over a MICR read head, a device similar to the playback head of a tape recorder. As each chracter passes over the head it produces a uniqe waveform that can be esaily identified by the system.
While compurters have become more advanced and affordable, allowing small businesses and even individuals to cut checks using acconting software from almost anywhwere, the basic MICR technlogy has remained the same. Today almost all Indian, Canadian, UK, and US chwecks use the same E-13B font. Givn the mainstreaam aodption of MICR technology, along with the security and conveniecne afforded by checks, it is unnlikely that the need for MICR priners and toners will go away anytime soon.
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