Believe it or not, Check21 isn’t the name of a new grunge rock band. It’s a form of somewhat new payments technology, and in this post, we’ll provide an answer to the question: Just How Does Check21 Work?

how does check 21 workCheck 21, technically called the Check Clearing for the 21st Century Act is federal legislation that began on October 28th, 2004. It permits financial institutions to electronically process checks. By fostering innovation within the check processing system, the law was made to boost the efficiency of the country’s payments system.

Rather than physically transporting paper checks from one bank to another bank, Check 21 lets banks process more checks electronically. By capturing a photo of back and the front of each check, including its payment details, banks transmit these records electronically. If a paper check is required by a receiving person or institution, the lender can use the electronic image and detailed info to recreate a paper substitute check.

Not every financial institution has the capacity to receive pictures, so some companies offer this service. A file is made and sent for image replacement to The Federal Reserve or presentment point. If one needs a substitute check, the sending bank accounts for the price of creating and transporting the substitute check to the receiving bank, presentment point or Federal Reserve, although this may be changed in the future.

Remote deposit is a new banking service that has come from Check 21. This technique enables account holders to take pictures of the front and back of their checks along with their details for those checks being deposited. This information is subsequently uploaded to their bank and then the client’s account is credited. Remote deposit erases the need for companies and people to make a trip to the bank to deposit checks.

Check 21 processes and functions as a driver for brand new check capture technologies. In addition, it opens the door for new business opportunities and brand new markets. With a remote deposit capture applications option, for instance, merchants can image capture their checks at their place of business and send them to their bank electronically – conveniently and fast. This permits automatic posting with their accounts receivable system and eliminates their daily trip to the bank.

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