Checking Out

Dallas bankers are gearing up for an October testing of the biggest financial innovation since the check. The innovation will be the first step toward Electronic Funds Transfer – a project which should eliminate most paper checks from business transactions.

Beginning late this year, a few large Dallas companies will offer employees a chance to have pay checks credited to their accounts electronically, instead of the usual transaction by which an employee physically takes his check to the bank and deposits it. The electronic system will work like this: the employer produces a magnetic tape which contains employee names, the amount of each paycheck, the name of each employee’s bank and his account number. Before payday the magnetic tape is sent to an automated clearing house which electronically routes the information to area banks.

The electronic payroll deposit eliminates a trip to the bank and eliminates chances of losing the check or having it stolen. It also allows deposits while an employee is out of town.

The next step in Dallas electronic banking will be bill paying without paper checks. The bill paying transaction will probably work like this: a department store, for example, will send its customer a monthly bill. The customer signs the bill and returns it, authorizing the department store to deduct electronically a specified amount from the customer’s checking account. No check is written.

The pay check and bill paying systems are the first steps toward a checkless society, where paying for groceries, for instance, will involve punching up the “check” on a grocery store terminal, which will instantly deduct the amount from the customer’s checking account and deposit it in the store’s account. Not only will this reduce the volume of paper checks, but a merchant will know immediately if the customer’s account won’t cover his check, because the terminal will indicate insufficient funds. This innovation will put an end to the old game of writing checks one day and racing to the bank to cover them the next day.

The electronic funds transfer system is being implemented by Dallas and Fort Worth’s big downtown banks,which are attempting to persuade some of the city’s largest employers to participate in this fall’s test. In turn, theparticipating companies will have to sign up employees,who must grant standing approval before their pay checkscan be deposited electronically. Among the most likelyemployers to first test the system are the City of Dallas,large manufacturing concerns like Texas Instruments andthe big banks themselves.

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