When Hank Farrar became a champion of check "electronification"-a term used to describe various interim steps in the migration from checks to electronic payments, like check imaging and electronic check presentment (ECP)-he thought it would be a good idea if electronic check initiatives could be wired into ATM networks. After all, checks, like most ATM transactions, are debits against demand deposit accounts (DDAs) at financial institutions. And many of the same financial institutions that hold ownership positions in the major ATM networks are also members of the New York Clearing House, the nation's oldest check clearinghouse and Farrar's employer at the time. But conventional wisdom in the payments business has been that the systems that drive ATMs (a retail banking operation) cannot be linked in a real-time fashion with check processing (a wholesale bank operation).
Farrar was skeptical, and he wasn't alone. It's a tenet of banking that many in retailing-where bad check losses top $10 billion a year-have questioned as well. After all, plenty of retailers accept debit cards at the point of sale, effecting debits to customers' DDAs. Why not provide the same connectivity for check services so retailers can have a better handle on the negotiability of checks that are being tendered at the point of sale?