Search the Internet          Tips  Sites: Finance, Investment

Electronic cheque transfer may soon be a reality

In the era of credit and debit cards and online payment of bills when the use of paper cheques has dwindled, work for electronic movement of the 'good, old' cheque -- right from the source to its destination -- is underway.

It may come as a surprise but research being undertaken at the MIT Sloan School of Management in Cambridge, Massachussetts, known for innovation and cutting edge products, has begun to revolutionise the cheque-paying world.

"A lot of people simply feel much more comfortable with cheques," said MIT Sloan co-director of the Productivity From Information Technology (PROFIT) Initiative Amar Gupta, who is developing cutting-edge systems to replace this old paper trail with seamless, technology-based systems that are more efficient, more fraud resistant and less costly.

"People hear some horror stories about electronic cheques and want to stay with paper cheques that provide them with a physical receipt for their transaction.

"However, various research have found that it costs from a dollar to five dollars for processing a single cheque.

"Our goal is to electronically take the cheque right from the source to its destination. Such technology will help eliminate several steps that now slow payment transfers. It will also help reduce errors and other problems common to the current process of clearing cheques,'' he said.

More than 50 billion cheques are processed in the United States alone every year, according to the Federal Reserve Bank and other research.

For Gupta, paper cheque writing isn't just an outdated way of conducting business. It adds significant costs across the economy, even if the individuals writing the cheques aren't directly aware of those added costs to business.

"A Federal Reserve study found that the direct cost to society is $1.25 per cheque. People are surprised when I explain to them that there are on average five different transactions between the time I write a cheque and I get it back. If you and I had to pay one to five dollars per cheque, we'd have stopped using them a long time ago."

Gupta, who has developed and executed several significant information technology projects in the United States and abroad since joining MIT in 1979, said the biggest challenge is to come up with comprehensive, system-wide solutions to the paper cheque problem.

"Most people who look at cheque writing usually take a piecemeal approach," he said.

"What's exciting about our work is that it envisions an integrated, end to end solution. We are getting all the right constituencies in line to analyse the problem and come up with solutions that make broad sense."

In an important first phase of his project, Gupta and his MIT Sloan team developed technology, a few years ago, to automatically read handwritten information on cheques, including the amount of payment.

"The technology we developed has clearly influenced the development of new products that are able to read handwritten cheques at high speed and with high levels of accuracy," said Gupta.

The next stage of easing paper cheque costs and delays focuses on extending technology so that cheques are cleared by fully electronic means.

These efforts to apply new technology to old-fashioned cheque writing have already been noted with approval by key public and private players in the US, including the Federal Reserve Bank and the National Automated Clearing House Association.

"Other countries also want to get on the bandwagon. We have been talking to people abroad who want us to do studies, especially in India and Brazil," said Gupta.

Indeed, the potential for fully electronic cheque transfer may be greater in other countries, where single, strong powerful banks are in a position to better control the overall cheque process, he added.

UNI

ALSO READ:
The Rediff Budget Special
Money
Business News