Financial institutions have established various associations and processing relationships under a set of mutually agreed to methods, processes and time limitations that are directly related to the exchange of documents evidencing monetary transactions. These transactions are generally referred to as magnetic ink character recognition (MICR) debits and credits. These documents are in the form of checks, deposits, drafts, and adjustments and are theoretically presented by delivery of a physical document. For purposes of discussion herein, any such documents may be referred to as “checks.” This practice has been in effect for many years. There is a well-defined and well-known process within the banking system of the United States and within the systems of other countries that supports the exchange of these items. This process is known as the check clearing process or check clearing system. This process begins with the presentation of a MICR document to a financial institution. Financial institutions must present millions of these items each day within their own franchise as well as to other financial institutions. Presentment can be accomplished through clearing house arrangements.
As consumer demand for expedited funds availability and faster settlement of accounts has grown, and legislation has been passed to accommodate this consumer demand, methods have been created to allow earlier posting of checks to drawer accounts at a paying bank. These methods most typically involve the advance presentment of a “cash letter” from a depositary bank to a paying bank, the cash letter containing MICR data read from checks. Settlement occurs based on the cash letter, but reconciliation with paper checks is still required once the paper checks have been presented. Additionally, both banks typically keep either physical or electronic copies of checks for archival purposes.
The shipment of cash letters must meet rigid time schedules that can be impacted by bad weather, traffic problems or emergency situations. As a result, the requirement that the cash letter be a physical document has, at least between some banks, been eliminated and an electronic cash presentment (ECP) file is used. ECP files are formatted according to accepted industry standards. Either paper cash letters or electronic cash presentment files can be sent directly between financial institutions, but more often, they are sent through clearing agents.
Reconciliation processes based on the paper checks are subject to numerous exceptions as a result of paper handling and due to late delivery of work and work not being received. Additionally, each bank maintains its own redundant copies of checks for archival purposes. Some banks maintain these copies only in physical (paper or microfiche) form, others maintain them in electronic image form, and others maintain both. Additionally, some banks contract out their check archiving to a archiving services vendor, but each bank still maintains an independent archive.
USPTO Backgrounds
USPTO Backgrounds