Check Imaging & Remote Deposit Capture

The History of Check Imaging

Unlike other payment types such as cash, automated clearing house (ACH), credit card and debit card, check imaging is still in its infancy.

Check imaging was birthed in the legislative aftermath of the September 11th terrorist attacks. During that time period, in order for a check to deposit to a place of business, each physical check had a labor intensive and lengthy route for deposit. First, it had to be transported from the place of business accepting the check to the business’s local bank. There, the local bank could accept the checks drawn on that local bank and deposit them to the business’s bank account. For all other checks written from other banks (usually the vast majority of checks), in order for the debit to the checkwriter and credit to the bank account of the business to happen, the physical check had to be transported to the Regional Federal Reserve district. Each night, checks were loaded onto airplanes around the country and transported to the regional Federal Reserve district. This expensive and burdensome process came to light in the days following 9/11 when billions of dollars in checks sat on the runways of thousands of airports around the United States and the Fed had to step in and float the economy for several weeks to the tune of over $45 billion.

Remote Deposit Capture got its start in 2003 with the passage of the Check Clearing for the 21st Century Act and was signed into law by President Bush. This act of Congress gave scanned images of checks the same legal standing as the original paper check itself. The intent was to reduce the expense in transporting checks from state to state to clear in the various Federal Reserve districts as well as speed up the process and eliminate the Fed from needing to step in and float items.

A year later on October 28, 2004, the Check 21 Act, as it became known, took effect. While it took time for the banks to agree on standards for imaging checks and for hardware and software to be developed to accommodate the new law, eventually the standard that is accepted today took effect. Known as the X.937 file format, this became the standard for check images, and all banks and hardware manufacturers followed suit.

What is Remote Deposit Capture?

Remote Deposit Capture is a service that allows a user to scan a check and transmit the image to a bank for posting and settlement. The service requires a hardware check scanning device, communication infrastructure, and software (usually installed on a computer but sometimes found on check scanners). Checks received for payment can be scanned and digitally deposited using the image of the check. The image has the same legal standing as the original item.

Our RDC Process


Our process for remote deposit capture is six steps:

  • Non-profit Organization receives donations by check in the mail or at their location.
  • Non-profit Organization performs the normal check remittance process. This process includes opening the mail, data entry from the payment coupon/control document (constituent response device), data entry from the check (dollar amount, date, account number, etc.), and information uploads to the donor CRM and accounting software.
  • Checks are then typically provided to the organization’s treasury area where the Non-profit Organization prepares a deposit (deposit ticket with total and accompanying checks).
  • With Remote Deposit Capture, instead of physically going to the bank to deposit the checks, the organization can now scan the remittance and checks using a desktop scanner.
  • Once the check images are captured, an ACH file (for eligible items) and/or an image-based deposit is prepared. The Paperless RDC system can then transmit the deposit to the organization’s bank.
  • The Bank receives the ACH file and/or image deposit, posts to the organization’s bank account and assigns funds availability based upon an agreed upon credit and funds availability policy.

Depending on the strategy employed by the organization accepting the checks, the RDC process can range from a simple deposit function to a complete integration of back office donor management and banking functions. At Paperless Transactions, our RDC service not only provides check imaging capabilities, but our Check 21 software allows users to scan remittance coupons. By capturing predefined fields such as donor, amount, campaign and any other data of your choosing, the software automatically populates your donor management system, thereby eliminating timely steps in your organization’s workflow.

Schedule a Check Scanning Demo