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Developing a Common Machine Language Banking: The ABA Technical Subcommittee Story

IP.com Disclosure Number: IPCOM000129908D
Original Publication Date: 1995-Dec-31
Included in the Prior Art Database: 2005-Oct-07
Document File: 21 page(s) / 80K

Publishing Venue

Software Patent Institute

Related People

JAMES L. MCKENNEY: AUTHOR [+2]

Abstract

Before the electronics era, banks were forced to close at two p. m. to process checks collected during the morning and early afternoon. If you were to visit a typical city bank of the 1950s to observe the processing, your first stop would be a large room full of machines with bins and keyboards operated by young women with stacks of checks in front of them. The women key in information, insert the top check from their stack into the machine, and press a button. Upon closer inspection you discover they are keying in the identification number of the bank to sort the checks into bins. The amount of the check then is entered on a running total for the batch and increases the total for the bin. At the end of the batch of checks, the women print out the total for the batch and for each bin on a paper strip, wrap the subtotal strip around each sorted batch of checks, and place them in a larger bin for each bank. One bin is for ";on us"; checks- checks for accounts at that bank. The checks not belonging to the visited bank are Federal Reserve for further processing. [Figure containing following caption omitted: This is the way an operator sorted checks prior to the introduction of MICR. Sorters organized checks using alphabetical bins on the basis of signature. ©; CBI] The ";on us"; checks are taken to a larger room where more young women sit at desks sorting checks into bins. The batches are separated into bins arranged in alphabetical order based on the first letter of the last name of the signature. Periodically messengers collect the sorted batches and put them into larger bins of alphabetically sorted checks. These checks are further sorted within each letter or groups of letters until all checks are sorted in alphabetical order. Finally, often the next day before proofing and sorting begin again, the checks are processed against the customer's balance by entering the amount of each check on the customer's balance card, subtracting it from the previous balance using an adding machine, entering a new balance, and replacing the card in its stock. If the account is overdrawn, the balance card is placed in a separate bin to be further handled.

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THIS DOCUMENT IS AN APPROXIMATE REPRESENTATION OF THE ORIGINAL.

Copyright ©; 1995 by the Institute of Electrical and Electronics Engineers, Inc. All rights reserved. Used with permission.

Developing a Common Machine Language Banking: The ABA Technical Subcommittee Story

JAMES L. MCKENNEY

In the mid-1950s a volunteer committee of bankers managed the development of a check processing standard that transformed the banking industry. The standard forced business machine manufacturers to adopt the new system rather than continuing to incrementally increase their own market share. The result was a new system allowing economies of scale through the exploitation of emerging electronic technologies. In tracing these developments, this story illustrates an interesting episode of how the managers guiding hand" works to allow markets to shape technology.

Introduction

Before the electronics era, banks were forced to close at two p. m. to process checks collected during the morning and early afternoon. If you were to visit a typical city bank of the 1950s to observe the processing, your first stop would be a large room full of machines with bins and keyboards operated by young women with stacks of checks in front of them. The women key in information, insert the top check from their stack into the machine, and press a button. Upon closer inspection you discover they are keying in the identification number of the bank to sort the checks into bins. The amount of the check then is entered on a running total for the batch and increases the total for the bin. At the end of the batch of checks, the women print out the total for the batch and for each bin on a paper strip, wrap the subtotal strip around each sorted batch of checks, and place them in a larger bin for each bank. One bin is for "on us" checks- checks for accounts at that bank. The checks not belonging to the visited bank are Federal Reserve for further processing.

(Image Omitted: This is the way an operator sorted checks prior to the introduction of MICR. Sorters organized checks using alphabetical bins on the basis of signature. © CBI)

The "on us" checks are taken to a larger room where more young women sit at desks sorting checks into bins. The batches are separated into bins arranged in alphabetical order based on the first letter of the last name of the signature. Periodically messengers collect the sorted batches and put them into larger bins of alphabetically sorted checks. These checks are further sorted within each letter or groups of letters until all checks are sorted in alphabetical order. Finally, often the next day before proofing and sorting begin again, the checks are processed against the customer's balance by entering the amount of each check on the customer's balance card, subtracting it from the previous balance using an adding machine, entering a new balance, and replacing the card in its stock. If the account is overdrawn, the balance card is placed in a separate bin...