Over time, the cheque processing system has improved in which the speed for clearing the cheque has become faster and security of the cheque improved. In this transformation of cheque processing, one major introduction was the Cheque Truncation System.
Cheque truncation system is nothing but converting the physical cheque to electronic format at the bank’s end, which will allow the electronic transmission and settlement thereby ending the movement of the physical cheque through the system and the clearinghouse. Cheque Truncation System has advantages to the bank like
- Cheque handling cost is lowered
- Risk is lowered, and the chance of fraud is reduced
- Allows for multiplication of branches and ATMs, thereby reaching farther into the customers because the system is no longer dependant on the geographical location for cheque processing
- Enables quicker clearing cycles