History of Checks

History of Checks (from the Silk Road to the Digital Age)

BY CHARLES JOSEPH



Checks are such an integral part of modern life that it’s hard to imagine what the world would be like without them.

But what you may not know is that these nifty little slips of paper have been around for centuries — possibly even millennia!

Let’s explore the history of checks and learn some wild facts about these financial staples we often take for granted.

The History of the Check

When Were Checks Invented?

Checks seem like modern inventions, but evidence of their existence dates back to 300 BC!

That’s when the Maurya Empire (which encompassed present-day India) began using the adesha. If you wanted to transfer funds from your bank account to another person, you’d write out an adesha instructing the banker to do so.

And beginning around 100 BC, the ancient Roman Empire made use of a similar system.

Checking on the Silk Road

Checks really took off in the 400s AD. At that point, the Silk Road trade route between Europe, the Middle East, and Asia was bustling with activity — but the additional traffic made carrying large amounts of cash dangerous.

So traders in the Sassanid Empire of Persia began using the čak — a letter of credit that could be carried in lieu of cash. The čak’s popularity soared along the Silk Road, and by the 9th century, a čak drawn from a bank in one country could be cashed at a different bank in a different country.

Similar concepts arose around the world, from the Ghana Empire in Africa to Venice in Italy.

But historians believe that the closest analog to the modern check was invented in the early 1500s in Amsterdam.

How Did the Modern Check Evolve?

In the 1500s, the merchants of the Dutch Empire grew tired of storing and protecting large amounts of gold and silver as they traveled. This gave rise to the cashier industry: for a fee, a merchant could store their money locally and securely with a cashier.

Cashiers soon began offering other services, such as paying debts on behalf of depositors using written orders. These notes included the amount to be paid, the payee’s name, and the purpose of the payment — sound familiar?

With these so-called “bills of exchange” readily available, Dutch merchants could ramp up their operations without worrying about the logistics of managing their physical cash.

Checking Gets Secure in England

The concept spread to England, where the ability to immediately draw funds from a bank account with a simple note drew the attention of scammers.

To stop them, the Bank of England came up with an idea that would revolutionize banking forever. In 1717, it began issuing bills of exchange on “cheque paper” pre-printed with serial numbers — and began requiring customers to fill them out in front of a banker.

This marked the beginning of the usage of the word “check” or “cheque” for these instruments. The name referred to the bank’s newfound ability to check the serial numbers on the slips to prevent fraud.

Settling Checks in the 1700s

Being a banker was exhausting in the 1700s. At the end of every day, bankers would go from bank to bank around the city, exchanging checks and tallying balances until everything added up.

But around 1770, a group of bankers in London decided to meet up in a pub and settle their balances together over drinks. This became a daily occurrence — and marked the invention of the banker’s clearing house, which evolved into the global check processing system we use today.

When Did Checks Arrive in America?

In 1784, Alexander Hamilton established the Bank of New York, which immediately began issuing its first checks.

A Bank of New York checkbook from 1796 was discovered in New Jersey in 2014, giving us a rare chance to see what checks were like in early America. Much like today’s checks, they feature pre-printed field labels with space to fill in amount and payee info — but you won’t find a modern check made out to Alexander Hamilton himself!

When Did Checking Become Automated?

Computers and other machines made nearly all aspects of banking simpler and faster, and checks were no exception.

Beginning in 1959, checks were printed using standardized machine-readable characters. This allowed banks to use automated check sorters and readers to clear checks in bulk — and as a result, check use skyrocketed.

These early check readers were incredibly complex: each one contained over a million feet of wiring, weighed 25 tons and used 80 kilowatts of energy! This photo of the interior workings of the machine shows just how intricate — and enormous — it was.

Fun Facts About Checks

How Many Checks Are Processed Each Year?

In the U.S., check usage peaked in 1992 when over 19 billion checks totaling over $13 billion were processed.

Today, that number has decreased considerably. In 2020, only 3.7 billion checks were processed, with a total value of $7.8 billion.

What Is the Largest Check Ever Written?

During the 2008 financial crisis, American financial company Morgan Stanley was about to go under. Desperate to prevent a default, it sought assistance from Mitsubishi UFJ, a Japanese bank.

Mitsubishi UFJ agreed to invest $9 billion in Morgan Stanley in exchange for 21% ownership, but the traditional transfer process would have taken too long. So Mitsubishi UFJ simply wrote Morgan Stanley a record-breaking$9 billion check.

Morgan Stanley cashed the check and made it through the crisis. And that $9 billion investment has turned into $40 billion worth of ownership for Mitsubishi UFJ — maybe they’ll cash out and break their old record!

Can You Cash an Oversized Check?

Ever wondered if those giant novelty checks given to prize winners or displayed at charity events can actually be cashed?

The answer is yes — as long as all of the required information is valid and present on the check, it can technically be cashed just like a regular one. However, most banks greatly prefer standard-sized checks as they can be processed by machine, so individual banks may have rules against cashing novelty checks.

As such, most giant checks come with a corresponding standard-sized one to make cashing it easier for everyone.

And that’s probably for the best — after all, would you want to be the banker tasked with processing the record-breaking 82×39 foot check displayed at the 2007 Shahr Al Kheir Festival in Kuwait?

Personally, you’d have to write us a pretty big check to make us volunteer for the job!

The History of Money in Ten Minutes (Video)