What is Check 21 associated with in payment processing?

Check 21, officially known as the Check Clearing for the 21st Century Act, is primarily associated with the capturing and transmitting of check images for payment processing. This legislation significantly modernized the way checks are processed in the United States by allowing banks to use electronic images of checks instead of physically transporting paper checks.

The law facilitates electronic check processing, which leads to faster clearing times and reduced costs associated with handling physical checks. Institutions can create a substitute check, which serves as a legal equivalent to the original paper check, ensuring that the funds can be processed electronically. By doing so, Check 21 enhances efficiency in the payment system and promotes the use of digital tools in banking, thereby streamlining the overall check processing flow.