How Personal and Business Checking has Evolved over Time

The term “check”—one that you probably hear on a near daily basis—is formally defined as “a written order, usually on a standard printed form, directing a bank to pay money.” Though this definition may sound somewhat familiar, what most people don’t realize is that.

The history of writing checks (both personal and commercial) can claim a history that is thousands of years long. In fact, most historians believe that the practice of check writing has been around since roughly 300 BC, where Mauryan people in India were already issuing payments promises on behalf of a third party.

As the practice of check writing has evolved over time, so too has the instruments used in the course of conducting business. Today, businesses of all varieties are finding that they have many different check and statement issuing practices available to choose from.

In this article, we will discuss how the checking industry has remarkably evolved over time. We will discuss the modern role that check writing plays and how businesses can benefit from advanced check writing systems. As time goes on, these practices, systems, and technologies will likely continue to improve.

Humble Origins: the Early Days of Check Writing

Before the development of modern currencies, traders would need to carry large amounts of tradable goods (often in the form of gold coins) in order to make major purchases. As economies became more complex, however, these practices were proven to be impractical. In response, traders began to look for ways to offer a promise to pay in the future.

The origin of the check was a result of what appears to be a very natural process. The “bills of exchange” that preceded modern checks were a practical alternative to what had proven to be a major hassle. The development of the check largely took place in India, Iran, and throughout the Middle East. Many of these regions had largely nomadic societies, where carrying around large amounts of gold and silver was not only a physical burden—there was also a strong risk of getting robbed.

Venice—a city-state that was largely populated by merchants and traders—helped internationalize the check around the year 1200. Within the next few centuries, around the 1500s, the Dutch and British would further develop the use of “cashiers”, laying the foundations for a modern banking system. Checks eventually became known as “draw notes” and were directly connected to a specific source of stored funds. Eventually, further actions would need to be taken in order to prevent check fraud.

Improved Economies, Improved Check Writing Practices

Throughout the 1700s, checks established themselves as an essential component of both personal and commercial finances. The Bank of England, for example, cleverly devised ways to assure that checks could be fully verified (requiring in-person signatures and using specific check numbers). As checks became more reliable, public trust for the checking system gradually increased.

In the 1770s, London bankers created “clearing houses” making it easier for banks to settle all checks at the end of each business day. This also allowed the formal City of London to establish itself as the epicenter of European banking. Meanwhile, in the United States, Alexander Hamilton carefully established the Bank of New York. Since 1784, issuing checks has been an integral part of the American business world.

The development of the checking industry was primarily lead by the British, but there were also many developments in the United States, Switzerland, India (Negotiable Instruments Act of 1881), and elsewhere around the world. Throughout the 20^th century—which was characterized by multiple waves of globalization—many countries also worked to establish a set of universal checking practices.

Other major developments in the 20^th Century included the development of machine-readable characters, check guarantee cards, debit cards (beginning in the 1990s), and various methods of promoting check security. Checks in different countries also became more alike and, as a consequence, they became generally easier to read and to use.

The Current State of Checking and Statement Printing

Today, the practice of writing checks remains an integral part of our global economy. New types of paper, ink, and even envelopes have made the act of forging checks significantly more difficult. Banks and other financial institutions have also significantly improved their communications strategies; in response, identifying fraud and correctly addressing it is now more popular than ever before.

Another major trend has been the increased use of digital checking and statement distribution. By creating a digital system, businesses can save considerable amounts of money while also delivering their checks in a timelier manner. Most experts believe that check writing peaked in the late 1980s, which makes sense due to the fact that debit cards and related instruments debuted in the early 1990s. Though paper checks still have a certain appeal, the amount of checking that takes place online has been steadily increasing with each passing year.

Looking Towards the Future

There is truly no telling what the future will have in store. There are, however, quite a few trends that—barring a major, economy shifting event—will likely continue over the foreseeable years to come.

·         Check Issuers will continue to invest in security. As was the case in 300 BC, security is necessary for the check writing industry to function. Paying more for specialized inks, chemically sensitive paper, and blacked out envelopes will naturally be necessary.

·         Check writing will continue to shift online. All things considered, most people find digital banking to be easier to use and more accessible than physical banking.

·         Businesses will outsource their current checking needs. Because most business owners do not specialize in check printing and mailing, many are outsourcing these tasks to online experts. From an opportunity cost perspective, this is usually a logical decision.

·         New payment options will emerge. Technologies such as Apple Pay, the Square, and various others are allowing businesses to be more flexible than they once were.

What remains clear is that, as long as money will be required to pay for things, checks will continue to play a relevant role in our lives.

Conclusion

Economies are never simply “generated” out of thin air—in order to survive, an economy will need to carefully evolve over time. Checks have played a major role in the economic development of the world and have made commercial activities of all kinds significantly easier. As our economies continue to develop, so will the various ways that we pay for things.