Check/Check 21 Services

Running strong with
Check 21

April 2009

The Check Clearing for the 21st Century Act (Check 21) can be described as a force that has virtually transformed the landscape of the payments industry. The strength behind this force lies in creating innovative products and services to meet customer demands, adapting processing and transportation to meet customer requirements in the new environment, as well as in collaborating with vendors and industry work groups to establish best practices for electronic check processing to make the payments system, as a whole, more efficient.

Over the last five years, the Federal Reserve Banks have been in the forefront to meet the changing needs of customers in this new environment. We remain excited about moving toward full end-to-end electronic check processing, and we are taking steps as an organization and industry to continue making strides with Check 21.

Closing in on end-to-end electronic processing

Early estimates anticipated a decade of steady progress would be necessary to reach end-to-end electronic check processing. After a slow start, the accelerated adoption of electronic check processing has surpassed early expectations, with penetration rates being reached in half the time anticipated at the outset. “We've been talking about the last mile. I think we may be down to the last yard now," said Fred Herr, senior vice president in the Federal Reserve Banks’ Retail Payments Office.  

In 2004, one year after the Check 21 Act was signed into law, the Federal Reserve Banks introduced our Check 21-enabled product suite: FedForward^®, FedReturn^® and FedReceipt^® Services. These services are designed to help financial institutions transform operations in order to:

• Clear funds faster
• Reduce transportation costs
• Streamline backroom operations
• Extend deadlines

Throughout 2005 and 2006, electronic check processing gained greater acceptance and momentum as financial institutions nationwide started to realize faster funds availability, streamlined operations and decreased reliance on transporting paper checks. The inertia of previous years gave way to explosive growth in 2007, when electronic check processing surpassed paper check processing for the first time. By the end of 2008, conversions to FedReceipt exceeded 16,000 routing transit numbers. Our past helps identify our future direction and the next steps we will take as an organization, and industry, to continue running strong with Check 21.

Introducing innovative products and services

We will continue to enhance our Check 21-enabled product suite in order to optimize the benefits that can be achieved by a more complete all-electronic process. To that end, we are introducing FedReceipt Plus for Returns, which helps you achieve virtually full, end-to-end electronic check processing. Be sure to read, “FedReceipt Plus for Returns: The final frontier”.

Identifying processing efficiencies

Today’s Check 21-enabled payment products offer the benefits of reduced fees by replacing costly paper processing and transportation. The Federal Reserve Banks will continue to identify ways to hold down costs by scaling back paper check processing and transportation infrastructure to match declining volumes.

Building relationships; supporting collaboration

The Federal Reserve Banks will continue to support industry interoperability and best practices through our vendor outreach program and collaborative efforts with industry work groups including CheckImage Central (Off-site Link) and the newly formed Image Industry Interoperability Group (i3G). These relationships are critical as the industry strives to realize the full benefit of Check 21-enabled processing. More details are shared in, “i3G: Eliminating the final barriers to image exchange”.

Continuing to strengthen the value of Check 21

The Check 21 Act has transformed the landscape of check clearing in just five short years. Going forward, we will continue to adapt to meet customers’ needs in this new environment by innovating, driving efficiencies and collaborating with our customers and industry partners.

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