Time is a critical asset, especially in the business and finance world. So, everything that can shorten the time necessary for a process usually gets a whole-hearted welcome ceremony from the executives!
“Automated Cheque Clearing System” is such a time-shortening, efficient way to clear cheques and transfer credit nationwide. However, to understand its significance, we must first dive deeper into how cheques are cleared.
Should we really allow automated clearance and credit transfer when there is an onset of cyber hacking and data theft? Well, that’s what we are here to answer!
How Are Cheques Cleared and What Is an Automated Cheque Clearing System?
What are cheques? Cheques basically serve as a written order to pay issued by an individual or an entity/s, which authorizes their bank to withdraw funds from the entity account and transfer them to the recipient’s account.
This process of reading the cheque, checking the validity, and transferring the credit altogether is known as cheque clearing. Sounds simple enough!
Well, it was simple and worked perfectly for a long time, ever since banks started doing transactions. However, in today’s world, we need something digital, something that can travel through the molecules around us!
That’s where Automated Cheque Clearing System comes in. The physical paper cheque is converted into a digital image for streamlined processing between banks in this electronic process.
The automated process entails transmitting relevant data, images, and cheque codes through an Electronic Clearing Center and calculating the net balances resulting from these transactions.
Through electronic cheque clearing, financial transactions can be completed more efficiently and securely, reducing the reliance on the physical transportation of cheques.
Features of Automated Cheque Clearing Systems
Now that we have established that automated Cheque Clearing Systems are good for us let’s discuss some of the features digitalization brings to the cheque-clearance department.
The manual cheque-clearing system can be at bottleneck situations sometimes. Transfer of checks between banks at different bank locations takes time, which in turn slows down the credit transfer process.
However, automated clearing systems significantly reduce the need for manual processing. So, the bank officers can rely on machines to do this, and they can work on other banking processes.
Also, as automated systems have much faster processing times, you can receive your funds more quickly and carry on with your transactions without unnecessary delay.
There is always a question of security in digitalized financing services. Your peace of mind is important, and automated cheque clearing systems offer advanced authentication methods to ensure secure transactions.
These systems employ robust security measures to protect your financial information and prevent unauthorized access.
Digital signatures and encryption add an extra layer of security to your cheque transactions. These features safeguard your data, making it nearly impossible for anyone to tamper with or forge your cheques.
Cheque Truncation is one of the most important processes in the Automated cheque clearing system. It is a modern process that has revolutionized the way cheques are handled and processed.
It eliminates the need for physical transportation of paper cheques, making the entire cheque clearing process more efficient and secure.
In traditional cheque processing, physical cheques would be transported from the bank where they were deposited to the bank on which they were drawn.
This transportation process involved time, resources, and the risk of cheques being lost, damaged, or delayed. However, with cheque truncation, this cumbersome step is eliminated.
Process of Cheque Truncation
Cheque truncation involves converting the physical paper cheques into digital form at the point of deposit.
The relevant information, including the cheque amount, payer details, and payee details, is captured and stored electronically. This data is then transmitted securely to the clearing center or the central clearing house.
At the clearing center, the electronic images of the cheques are processed and verified. The necessary data is extracted, and the transaction details are sent to the respective banks for further processing. The net balances are calculated, and funds are transferred electronically between the banks involved.
By eliminating the physical movement of cheques, cheque truncation offers numerous benefits. Firstly, it significantly speeds up the cheque clearing process. Transactions that used to take days or even weeks can now be completed in a matter of hours or even minutes!
Additionally, cheque truncation enhances security. The risk of cheques being lost, stolen, or tampered with during transit is greatly reduced. The digital images of the cheques are securely stored and can be easily retrieved for verification or investigation purposes if needed.
One of the fantastic features of automated cheque clearing systems is their ability to facilitate seamless communication between different banks.
This interbank connectivity ensures a smooth exchange of cheque-related information, making the entire process more efficient and hassle-free.
Imagine a world where cheques move swiftly and effortlessly between banks. With automated cheque clearing systems, that’s exactly what happens! The system enables banks to easily share and exchange cheque-related information, ensuring that transactions are processed quickly and without unnecessary delays.
This method of transferring funds between banks is by far the most efficient. Whether moving money from the payer’s account to the recipient’s account or settling balances between banks, the streamlined process ensures that funds are transferred accurately and promptly.
Nobody wants to face errors in their financial books, and no one wants to lose their money because of a banking error. That’s why reducing errors and ensuring accurate processing is one of the most critical aspects of automated cheque clearing systems.
In traditional cheque processing, data entry errors were not uncommon. Illegible handwriting or manual data entry could result in mistakes that could have significant consequences.
However, automated cheque clearing systems greatly minimize the risk of data entry errors. The system handles the data entry process electronically, reducing the reliance on manual input and ensuring greater accuracy in the transaction details.
Thanks to the advanced technology and automated processes, data capture and processing are carried out with high accuracy. The system can accurately capture the necessary cheque information, such as the amount, payer details, and payee details.
This accuracy minimizes the chances of errors occurring during the processing stage, giving you peace of mind that your transactions are handled correctly.
Bangladesh Automated Cheque Clearing System (BACPS)
Gone are the days of physically transporting cheques from one bank to another. Through cheque truncation, the Bangladesh Automated Cheque Clearing System eliminates the need for physical transportation.
Instead, the system captures and processes the relevant cheque information electronically, reducing the risk of lost, damaged, or delayed cheques.
This automation system utilizes advanced Cheque Imaging and Truncation (CIT) technology, which enables electronic presentment and payment of paper-based instruments like cheques, pay orders, dividends, and refund warrants.
Benefits of BACPS
BACPS also relishes the fruits of any other automated system. The system has –
- Improved Efficiency
- Better Security
- Fewer Errors
- Better Interbank Connectivity
So, in conjunction with BEFTN and NPSB, BACPS can yield great results for the Banking sector of Bangladesh.
As per Bangladesh Bank Report, BACPS clears around 111,000 high value and 1,600,000 regular cheques every month, which is 95% of the total instruments.
Total regular value and high value instruments that BACPS clears per month is respectively around 404 billion and 528 billion BDT! So, the system has proven to be much more efficient.
With the automated system in place, transaction processing in commercial banks has become much faster. What used to take days or even weeks can now be completed within hours or minutes, making financial transactions more efficient and convenient.
The Bangladesh Automated Cheque Processing Systems (BACPS) is an integral component of the overall finance and banking modernization efforts.
It brings automation and technological advancements to the cheque clearing process, streamlining operations and improving the overall efficiency of the payment system.
Bangladesh Automated Clearing House (BACH)
The BACPS is controlled and regulated by Bangladesh Automated Clearing House or BACH, which is the first automated national payment system established in 2010.
BACH is a central entity that plays a crucial role in the automated cheque clearing system. It consists of two components: the Automated Cheque Processing System and the Electronic Funds Transfer.
These systems operate by processing transactions received from banks in batches at a predetermined time. Settlements are made through a single multilateral netting figure recorded in each bank’s respective books maintained with the Bangladesh Bank.
Automated cheque clearing systems have revolutionized the banking industry by improving efficiency, enhancing security, and minimizing errors. These systems reduce manual handling, speed up processing times, and employ advanced authentication methods and encryption for secure transactions.
Cheque truncation eliminates physical transportation, while interbank connectivity enables seamless information exchange and fund transfers between banks.
In Bangladesh, the Bangladesh Automated Cheque Clearing System (BACPS) and the Bangladesh Automated Clearing House (BACH) have modernized payment systems, benefiting individuals and businesses. As technology advances, these systems will continue to shape the future of banking, making transactions more convenient, reliable, and efficient.