What is truncation?

Truncation implies the possibility of replacing the original documents with computerized records for collection through payment systems. It is a procedure by which the entity that takes a document transmits the information about it to the released entity, without the need to send the original document "truncated" to carry out the operation. The documents that can be truncated are the checkbook, promissory notes current account or direct debit payments, which are issued for an amount equal to or less than the “truncation limit”.

The truncation limit is currently 15.000 euros, an amount beyond which the check is not frozen and must be physically exchanged. It is therefore a matter of replacing original documents with computerized or electronic records that contain your most important information. The best known in this area is check truncation. New laws were established to be able to truncate a check. New Zealand was one of the first countries to join this system, and many countries followed. When some of them decided on this option, a decrease in the use of checks was created, generally in favor of electronic payment systems.

So, new laws were needed to create new forms of address to ensure that the digital image is a reliable and accurate copy of the original check, as well as a process to secure and protect the consumers. So the security related to this also entails a check clearing process to accommodate electronic checks.
In this way, banks and financial institutions use these truncation systems to manage this process.

However, some banks have modified their own banking systems or built their own system to handle this truncation, and on the other hand there are also software companies that provide services and commercial solutions for this truncation.

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