Financial Update (October-December 2001)
New MICR Standard
Fed Moves Toward Single Standard Format for Transmitting Check Detail
t a national electronic check presentment forum attended by U.S. check processing leaders, keynote speaker Patrick K. Barron, Atlanta Fed first vice president and chief operating officer, announced that the Federal Reserve will adopt a single standard for MICR (magnetic ink character recognition) detail transmission by mid-2005.
“We need a set of standards that provide maximum opportunity for efficient interchange of check payments,” said Barron. “The Fed presently supports about 70 different formats across our 45 check processing sites. We simply must free ourselves from the burden of multiple formats.” Barron is also the Fed’s retail payment product director and is responsible for coordination of check and automated clearinghouse service across the Fed System.
While most of the nation’s check writers pay little if any attention to the MICR detail found on the bottom of their checks, the nation’s banks rely heavily on magnetic ink data to credit, sort and pay billions of checks annually. A single, standard MICR data format would help reduce the cost and complexity of the nation’s paper-based payment system because MICR detail could be transmitted electronically without moving the paper checks. One of the chief obstacles to this electronification of paper checks is the lack of uniform exchange standards.
The Federal Reserve plans to adopt the ANSI ASC X9.37 format as its single standard for MICR detail transmission. A four-year transition to the single standard format will give Fed customers and their software vendors time to adapt. The Fed plans to issue a user and implementation guide in 2002 and will host a software vendors’ conference later in the year. The Federal Reserve is the largest single, nationwide processor of checks. In 2000 the Fed processed nearly 16 billion checks.