Ever wonder how a simple piece of paper with little more than your signature and amount could count as "currency?" Around 18 billion checks per year are still being written, according to the Federal Reserve. So, how did this come to be? The evolution of the modern "check" comes with a surprisingly fascinating story.
The first "check"
The first appearance of checks is still up for debate. According to Wikipedia, there is early evidence of using checks in India during the Mauryan period (from 321 to 185 BC). A commercial instrument called the adesha was in use, which was an order on a banker desiring him to pay the money of the note to a third person. Some experts think the Romans may have invented the check about 352 B.C. But, according to most history texts, it probably wasn't until the early 1500s, in Amsterdam, Holland that people who had accumulated cash began depositing it with Dutch “cashiers,” for a fee, as a safer alternative to keeping the money at home, then the cashiers agreed to pay the debts out of the money in each account, based on the depositor's written order or “note” to do so.
The use of checks had a slow acceptance in the UK, however printed checks can be traced to British banker Lawrence Childs in 1762. Meanwhile, in the United States, checks are said to have first been used in 1681 when cash-strapped businessmen in Boston mortgaged their land to a “fund,” against which they could write checks.
The appearance of the "clearinghouse"
The popularity of checks rose so fast that banks couldn’t keep up with the subsequent volume of transactions being made. Transactions were still done "in-person" by porters that would travel on foot hauling along checks, gold currency, and a ledger, in order to the exchange at the connected banks. The porters would criss-cross the city, many times visiting the same places over and again, making for an exhausting and incredibly inefficient method that would typically draw out the day long past closing time.
As a result, the clearinghouse was established, which allowed banks to settle their accounts in a central location rather than going from bank to bank. Starting in the 1960s, machine readable routing and account information was added to the bottom of cheques in MICR (Magnetic Ink Character Recognition) format. This allowed automated sorting and routing of cheques between banks and led to automated central clearing facilities. This meant that the payee no longer had to go to the issuing bank. Rather, they could deposit it at any banking location and the check would be routed back to the originating bank and funds transferred to their own bank account.
A new era
American businesses continue to pay an astonishing 50 percent of their bills by check, but analog is out, and digital is in. With the advent of secure check writing sites like Checkeeper.com, checks are printed and sent without you ever needing to buy a pen. Anyone with a bank account can now print their own checks or even have the Checkeeper site print and mail them on their behalf, complete with a double-window envelope and first class stamp, to boot. This convenience, along with the 2004 passage of the Check 21 Act (which allows banks to take pictures of checks and move them electronically for mobile deposits) has significantly contributed to keeping checks not just alive, but thriving.
Though its origins may be argued for years to come, one thing is certain – the story of the check is a good one, with many chapters still to be written.