What is Check Clearing?
Check clearing is the process of transferring funds from one bank to another. When a check from one bank is presented to another bank, it has to go through a Check Clearing process before the funds is transferred to the receipient bank.
Starting Januay, 2017, the BSP announced that the Clearing Process shall be shortened from 3 days to one day or just 24 hours. This is good news to entrepreneurs and business. They can now realize cash payments following day upon issuance of a check instead of waiting 3 days for their funds to be withdrawable. See Philippine Star news write up on July 14 2017 elaborating on the announcement of BSP on one-day Check Clearing from the link below.
One-day check clearing starts in January 2017
BSP Governor Amando Tetangco Jr. yesterday signed a memorandum of agreement with Philippine Clearing House Corp. (PCHC) president and CEO Emmanuel Barcena to operationalize the Check Image Clearing System (CICS).
“Through CICS of the PCHC, all of our checks are targeted to be cleared in a fully electronic environment starting January 6 next year. For those of us who really are not specialists in this area, if there is one take away from this development, it has to be the fact that funds will now be made available by next day at the latest,” Tetangco said.
Tetangco said checks issued to family, friends, and business partners in various parts of the country would now enjoy near real-time finality of payment.
“And since check data are transmitted electronically, we necessarily eliminate transport risks on the physical cheques. We likewise address consumer protection issues that arise when our checks are either pilfered and/or altered to benefit those with ill-motives,” Tetangco said.
According to Tetangco, it is important to strengthen the check clearing system by leveraging on the advantages that technology provides.
“We are establishing the critical foundation for the adoption of check truncation technology. Simply put, we are moving from physical clearing of paper checks to a system that digitizes those same paper checks to facilitate their electronic clearing,” he said.
Data showed PCHC processes about 700,000 checks every day with an average value of P135 billion.
Tetangco said payments and settlement infrastructure plays a critical role in a dynamic and growing economy.
He cited a study by the Better than Cash Alliance in 2014 that showed only one percent of the monthly retail transactions are done in electronic form.
“This validates our heavy reliance on cash and checks in conducting our business. At a time when technology has become scalable, portable and affordable, this apparent reluctance to parlay the benefits of technology can only translate to further inefficiencies via foregone opportunities,” he added.
