Due to its safety and clearly supported legal framework, paper cheque has been a widespread staple of payment system for many years now.
The cheque-clearing process is also simple. Bearers may deposit their cheque at the bank where they already have a deposit account. Then the cheque will pass through the clearing process and funds will be made available within specified timeframes, which vary depending on the locations of cheque bearers’ and issuers’ accounts. For example, cheques are cleared within one working day in Bangkok area, while the clearing process can take up to three to five days for bearers’ accounts and issuers’ accounts located in different clearing zones.
The cheque-clearing process has developed with the influence of evolving technology. In many countries, physical cheques have been substituted by imaged cheques in the clearing process since they make the procedure more efficient.
The Bank of Thailand has also developed a cheque-clearing system based on imaged cheques called the Imaged Cheque Clearing and Archive System, or ICAS. The new system is expected to enhance the capacity and efficiency of the clearing process.
The major advantage of ICAS is that funds will be made available to all bearers’ accounts within one working day regardless of clearing zones. This leads to a more efficient circulation of money in our financial and economic systems, and eliminates opportunity cost of having to wait for cheques from different clearing zones to be processed.
For member banks, including commercial banks and specialised financial institutions, ICAS reduces logistic and operational costs related to handling physical cheques.
The ICAS process starts at the banks receiving deposits, which examine physical cheques and capture them to imaged cheques. The electronic data - the imaged cheques and related information - will be sent via the Imaged Cheque Clearing System, which automatically transfers the electronic data to paying banks. At the paying banks, all approval processes will proceed with imaged cheques. The cheque images will be stored in the Image Archive System for 10 years.
ICAS has been developed with a high security standard in transmitting electronic data between member banks and the central bank. The Electronic Transactions Act recognises the status of electronic documents as equivalent to the original paper-based documents. A special rule for converting documents into electronic data specifically for ICAS has also been prescribed by the Electronic Transactions Commission. The rule allows legal use of all imaged cheques that meet the required criteria in legal processes.
The central bank is in the process of establishing an implementation plan to ensure that all member banks are ready for ICAS, and that there are no unintended consequences on banks’ operations. In the meantime, all related parties need to learn and adjust to the new clearing system, as this is an important step for Thailand to start using electronic data in the financial and legal spheres.
The opinions expressed in this article are the author’s own and do not necessarily reflect the official opinion of the Bank of Thailand.