New tech is reshaping check processing

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Paper checks still move trillions in B2B, yet many financial institutions grapple with outdated, costly processing. The future isn’t just digitization; it’s intelligence. Discover how advanced AI-driven intelligent document processing (IDP) is revolutionizing check and remittance handling.

June 5, 2025

New tech is reshaping check processing

You’ve seen the headlines: Consumer check volumes are declining, and even the US Treasury is phasing out paper checks. And while it might be tempting to deprioritize your check processing operations, checks persist in B2B transactions where trillions of dollars still change hands via paper. Managing checks and preferred customer payments requires financial institutions to achieve a delicate balance of efficiency, security, and cost-effectiveness, a goal made more complex by systems often ill-equipped for modern digital requirements.

It’s time to look beyond traditional processing methods. We are generally familiar with optical character recognition (OCR), which provides the essential foundation to digitize critical data locked within checks and related documents. But real progress comes from intelligent document processing (IDP), which layers AI onto OCR to automate complex tasks and unlock efficiencies that basic digitization alone cannot deliver. Understanding how these technologies have evolved is crucial for leaders aiming to streamline costs, boost accuracy, and modernize their payment operations.

How are OCR, IDP, and AI used in check processing today?

In modern and demanding treasury operations, particularly within high-volume payment environments like wholesale lockboxes, the interplay between OCR, IDP, and AI is not just an upgrade but a significant shift towards intelligent automation.

While OCR provides the initial digitization of text, it’s AI-powered IDP that transforms the process by moving beyond simple recognition to comprehend the context and purpose of diverse (and unstructured!) documents. For treasury managers historically burdened by the inefficiencies of physical lockboxes and the painstaking manual effort of “staring-and-comparing” the data trapped within checks and a myriad of associated remittances, this is a game-changer.

AI-driven IDP intelligently discerns a check from an invoice, an EOB from a customer letter, and can extract vital data points like account numbers, payment amounts, and invoice details, even when their positions vary wildly across different document layouts. This intelligent automation is the cornerstone of modern check processing, significantly reducing manual data entry, minimizing errors, and directly accelerating cash application, ultimately providing treasury managers with faster access to working capital and richer data insights.

Here’s a closer look at how these technologies collaborate at each step of the check processing journey:

Intake and prep: Mail arrives, is sorted, opened, and the contents (checks, remittance documents) are scanned into digital images.
Intelligent data capture: This is where the magic happens.
- OCR performs the initial text recognition from the check image (account details, amount).
- IDP then analyzes all documents in the batch—checks, invoices, explanation of benefits (EOBs), coupons, and letters. It intelligently classifies each document type and extracts the specific data fields needed for processing, regardless of layout variations.
Automated reconciliation: IDP uses the extracted data to automatically match payments (checks) with corresponding remittance details and accounts receivable information, drastically reducing the need for manual comparison.
Streamlined posting and deposit: Validated data is formatted for automated posting to accounting systems, and check images are prepared for electronic deposit, often through an Image Cash Letter (ICL).

Video | Revolutionizing payment processing with AI-driven IDP

The evolution from manual processes to intelligent insights

Why should you care about this technological shift?

Because it represents a fundamental change in how payment operations can function, moving from a costly necessity to a potential source of efficiency and value.

Imagine the traditional lockbox environment: teams of people manually sorting mail, keying in data from checks and remittance slips, visually matching payments to invoices, and dealing with inevitable errors and exceptions. It’s slow, labor-intensive, prone to costly mistakes (“fat fingering” data entry), and difficult to scale up or down efficiently. Basic OCR helped by automating some data entry, but it often struggled with varied document formats and couldn’t truly understand the relationship between a check and its accompanying remittance advice.

Now, picture that same operation powered by modern IDP. The AI doesn’t just read; it comprehends. It tackles the complex, often unstructured data found on remittance documents—the very information crucial for accurate cash application.

The transformation: IDP automates the tedious, repetitive tasks that consume valuable human resources. It intelligently extracts and validates data from diverse documents, drastically reducing manual keying and verification.
Beyond efficiency: This isn’t just about doing the same tasks faster. It’s about unlocking new capabilities. By accurately capturing and structuring data from remittances, IDP enables straight-through processing for a higher percentage of payments. It provides cleaner data for downstream systems and analytics.
Empowering people: Instead of spending hours on manual data entry, your team can focus on higher-value activities: managing exceptions, analyzing trends, improving processes, and engaging with clients.
Client value: For your business clients, this translates into faster crediting of funds, fewer errors in cash application, and potentially richer reporting—enhancing their experience and strengthening your relationship.

This evolution from basic OCR to AI-powered IDP turns check and remittance processing from a manual bottleneck into a streamlined, data-rich operation.

Why this matters for treasury management leaders

Financial institutions are under pressure to reduce operational costs, enhance efficiency, mitigate fraud, and deliver superior client experiences. All while navigating technological shifts and resource constraints.

Investing in or partnering for advanced IDP/OCR capabilities directly addresses these pressures by:

Tackling operational costs: Reduce your reliance on manual labor and minimize costly errors.
Improving scalability: Provide flexibility to handle fluctuating check volumes without proportional changes in staffing or infrastructure.
Mitigating risk: Enhance accuracy in data capture and reconciliation, reducing compliance and financial risks associated with errors. There is tremendous potential for enhanced fraud detection patterns over time.
Modernizing operations: Replace aging, inefficient processes with intelligent automation while freeing up resources.
Driving client satisfaction: Faster processing, improved accuracy, and potential for enhanced data services adds tangible value for your treasury and business clients.

By embracing intelligent automation through IDP, financial institutions can transform their necessary check processing function into a strategic asset—one that is efficient, scalable, secure, and capable of delivering greater value in a changing payments landscape.

Iron Mountain for payment management solutions

Iron Mountain’s comprehensive products and integrated solutions provide seamless receivables management across payment channels and empower financial institutions, fintechs, and businesses to streamline processing and drive growth.

Leveraging our unparalleled footprint of Digital Supercenters, Iron Mountain provides outsourced lockbox services (upfront mail/check receipt & digitization) and simplified operations with IDP to extract and validate data.

Together, we deliver unmatched scale, security, and efficiency for your business.

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