Daily cheque clearings began around 1770 when the bank clerks met at the Six Bells, a tavern in Dove Court off Lombard Street in the City of London, to exchange all their cheques in one place and settle the balances in cash.
[3] In 1832 Charles Babbage, who was a friend of a founder of the Clearing House, published a book on mass production, The Economy of Machinery and Manufactures, in which Babbage described how the Clearing House operated:[4] In a large room in Lombard Street, about 30 clerks from the several London bankers take their stations, in alphabetical order, at desks placed round the room; each having a small open box by his side, and the name of the firm to which he belongs in large characters on the wall above his head.
On the rare occasions when the total paid did not equal the total collected, other clerks working for the Inspector would examine the paper trail of documents so that the numerical errors could be found and corrected.
[5] During the Second World War, the Bankers' Clearing House was evacuated to the Trentham Estate in Staffordshire.
The Suffolk Bank opened the first clearing house in 1818 in Boston, and one was incorporated in New York in 1850.
However, the amount so credited is "not available" to the depositor until the cheque has been cleared by the paying bank.
Top Tab Key used a physical mechanism: holes were punched in the top of each cheque representing the values of various digits, and metal keys used to physically move them until sorted.
Magnetic ink character recognition (MICR) was developed and commercialized in the 1950s, and enabled computers to reliably read routing and account numbers and automated the sorting of paper cheques.
The deposit bank would use the cheque image in the normal electronic clearance process, though in this case MICR data would not be available.
As the automation of cheque processing improved, fully electronic payment systems obviated the need for paper.
"CHIPS is the largest private-sector U.S.-dollar funds-transfer system in the world, clearing and settling an average of $1.5 trillion in cross-border and domestic payments daily.
Until 2001, CHIPS settled at the end of the day, but now provides intraday payment finality through a real-time system.