Checkavak Takes Iran
Economy, Business And Markets

Checkavak Takes Iran

E-check system Checkavak will go online nationwide on Feb. 11 – the anniversary of the 1979 Islamic Revolution.
With Checkavak electronic check management system, bounced checks will be almost eliminated from the banking system, making the financial system more secure, said Central Bank Governor Valiollah Seif.
Checkavak became operational in Tehran on Dec. 27, eliminating the circulation of physical checks in the inter-bank system and increasing check credibility.
Reportedly there have been malfunctions with Checkavak’s preliminary running in various provinces. But the system will be ready for operation as scheduled, officials say. The central bank issued a statement on Saturday, apologizing to the public for any difficulties they may have experienced.
“There may even be malfunctions after the system becomes fully operational, but these faults will quickly be fixed,” Seif said.
By introducing Checkavak, the central bank is seeking to organize checks and check transaction. The Iranian banking system has recorded 23 million bounced checks in the past four years, threatening the stability and security of this sector and the market in general, he added.
With Checkavak going online, the verification of checks and the clients’ financial status will be computerized and can be accessed instantly by banks.
Previously, it took at least 48 hours for checks to be cleared. But with Checkavak, a photo of the check is sent to the original bank for verification, thus, reducing clearance time to below 24 hours.
Currently Checkavak is undergoing preliminary test runs in 12 provinces.
 Payment Systems
The CBI has recently focused on developing the infrastructure of e-banking and electronic payments, in hopes of reducing the operational costs in the banking system. The outstanding developments in this field include forming the Central Database of Banking Network, issuing the first version of electronic bonds, designing the SEPAS (mobile payment system) and KIWA (the e-wallet) network and running Checkavak (electronic check management system).

The Checkavak electronic system utilizes special encryption to prevent counterfeiters from changing check photos via computer software, according to the central bank’s Information Technology and Communications executive.
Once Checkavak goes operational check books will be standardized in size and formatting.
Seif has expressed hope that Checkavak and the electronic verification of credit will create conditions where issuance of check books will take minimum amount of time with maximum accuracy. The governor has criticized the conditions under which banks have issued check books leading to the high number of bounced checks.
The governor has also said that Checkavak will bring security, stability and trust back to check market with the elimination of physical check circulation between commercial banks. With increased transparency, trust levels would increase between check drawers and receivers.
Other benefits of the new system include time-efficiency, minimized security issues, reduction of banking costs, and the eradication of check clearing houses.
The system will be constantly monitored online by the central bank thus data will reach the bank directly needless of any intermediaries. Lenders would therefore be able to assess the reliability and verify the validity of individuals wanting to receive new check books.
Additionally, with a better understanding of their balance, individuals will be more mindful when drawing checks; eventually, overdrafts would decrease.

 Bounced Checks
Over 420 trillion rials worth of checks bounced during the first eight month of the fiscal year starting March 21, 2014, central bank data shows.
More than 31 million checks worth 8.07 quadrillion rials ($230.5 billion at the market exchange rate) circulated thorough the banking system during the period, showing a 6.3 percent rise in the number of checks and a 15.8 percent increase in the total value of circulated checks.

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