Cross-Border Deposits

Cross-Border Deposits: Now That Canada Has Cheque Image Clearing, Can We Scan Canadian Cheques in America?

Since the Canadian banking system’s much-anticipated new clearing system went live in late 2014, two questions we’ve been getting a lot are: “Will I be able to scan Canadian cheques from the U.S. side of the border?” and “Will this lower the fees and wait times when I take a Canadian cheque to my bank?”

For those of you unfamiliar with the process, depositing a cheque from Canada — or most other foreign countries — can be an expensive and time-consuming task. The customer typically must bring the original paper cheque to his or her bank, which charges a fee of up to several dollars, plus foreign-exchange fees, if applicable, followed by a waiting period of days or even weeks before the funds are finally released.

Why all the extra hassle? Well, to be fair, it’s a lot of trouble for the banks, too. Since the two countries’ cheque-clearing systems have never been connected, the only way for an American bank to actually get the money from a cheque drawn on a Canadian financial institution has always been to physically return the cheque to Canada for processing. Often times, they will send all their Canadian cheques to one bank — most likely one of the major ones like Bank of Montreal, TD Bank or RBC that has operations on both sides of the border — and that bank will route it on to its final destination, where (eventually) the funds will be released and the American bank notified. Sending the cheque to the Canadian “gateway” bank takes time and money, and of course, it costs the gateway bank money to finally clear the cheque as well. So in the end, it’s a lot of work and a lot of waiting for everyone.

One day, it may not be like this. Right now, scanners are deployed all over the world in places like Egypt, Australia and France for the sole purpose of scanning American cheques and transmitting them back to the U.S. electronically. These are typically in places like hotels, embassies and tourist attractions that draw a lot of American tourists or expats, and most of these outfits keep an account at a U.S. bank. But the point is, if it’s an American cheque and you’re doing business with an American bank, you can transmit the cheque from anywhere in the world.

So, now that Canada has image-based clearing, shouldn’t we be able to just scan and send an image — whether it’s the customer or the bank doing the sending? The answer is not yet. While American and Canadian cheques are very similar, one problem for machines is the different MICR numbering systems used in the magnetic ink at the bottom. If an American remote deposit or bank back-office system sees a cheque in the Canadian format, it will spit it out as an error.