Checks have played an important role in the world for many centuries. They are the oldest form of non-cash compensation and continue to be one of the most used types of payment despite the emergence of electronic payments like credit cards, debit cards, online banking and mobile banking.
The use of personal checks and business checks will very likely remain a reliable payment option because of the role checks have played in history and society.
The Early Days of Checks
The earliest forms of checks can be traced back to the beginning of the banking system itself. Ancient Romans are believed to be the very first people to use what could be considered checks around the 1st Century B.C.
Other cultures had their own versions of checks.
During the 3rd Century A.D. the Persian Empire used letters of credit known as chak. The word is referred to in a number of Arabic documents. Muslim traders used a version of a check system in the 9th century and the Knights of Templar introduced another version of checks used by Christian pilgrims taking journeys to the Holy Land or across Europe between the years 1118 and 1307.
All of these check systems allowed merchants and travelers the ability to transfer large sums of money without carrying gold and silver coins with them. This could obviously be a physical burden, and there was also the possibility of getting robbed.
It is believed the first nation to widely use checks as a form of payment instead of only a means of transferring funds was Holland in the late 1500s. The use of checks spread across Europe from there.
Checks Become Personal
England began replacing handwritten checks (or cheques as they are called in the U.K.) with printed paper forms in the 1700s.
In 1811, the Commercial Bank of Scotland was the first to make personal checks with an account holder's name printed on the forms. Soon after - the Bank of England started binding and stitching checks together in sets of 50, 100 and 200 creating the first checkbooks.
Checks started being used in the New World a little later in history. It's believed the first American to use checks was a businessman who mortgaged land to a fund in 1681 and wrote checks against it.
Checks Get Modern
The modern age brought some big changes and the beginning of some competition for personal checks.
In 1959, the MICR code was developed in the United States. Magnetic ink character recognition allowed financial institutions to read the routing and account numbers with machines. It is similar to the way a tape deck plays back audio from the magnetic tape on a cassette. By 1963, MICR codes were used almost universally around the U.S.
The '50s also brought about the first charge card with the Diner's Club Card, and the first ATM or automated teller machine entered the scene in 1967 at a bank in London.
Personal checks were being used so often in the U.S. by the 1960s that there were concerns the volume of checks would be too much for financial institutions to handle. That's when ACH or Automated Clearing House payments were developed bringing about conveniences like direct deposit.
Checks remained a major player in the U.S. economy. A study in 1979 revealed that more than 85% of all non-cash retail payments were made by check. However, credit and debit card use increased through the 1980s and 1990s, and electronic payments as a whole outnumbered check payments for the first time in 2001 (according to the Federal Reserve).
In 2004, lawmakers in Washington D.C. passed the Check Clearing Act for the 21st Century also known as Check 21. The law allows merchants and financial institutions to create digital versions of personal checks called substitute checks.
Check 21 made check clearing and processing much faster and more efficient by eliminating the need for so many people to physically handle a check.
Checks in the Future
The use of checks has played an important role in finances around the world for the past 500 years. Even though modern conveniences and technology have decreased the need for checks, there are still many people who use them on a regular basis.
A recent study indicates 67% of Americans say they write at least 10 personal checks every month.
The newest payment option available to the public is mobile banking. People can use their cell phones to make financial transactions. A number of banks have created applications allowing customers to deposit personal checks or payroll checks using their phones. All a user has to do is snap a picture of the check's front and back, enter the amount and send it to their bank or credit union.
There may be a final chapter in the story of checks around the world, but for the near future, they will remain an option for everyone.
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