What does check truncation refer to?

Check truncation refers to the process of converting a physical check into an electronic format, allowing for its details to be transmitted electronically rather than dealing with the physical check itself. This process involves capturing the check's data through imaging or scanning and then securely sending this information to the financial institution for processing. By doing so, the need to handle and store paper checks is reduced, streamlining the workflow for banks and businesses alike.

This concept is particularly relevant in the context of modern banking and electronic payment systems, where efficiency and speed are paramount. By truncating checks, financial institutions can reduce processing times and increase accuracy in handling transactions. This method is pivotal in today's financial landscape, as it ties into broader trends of digitization and reducing physical documentation in banking practices.