When i was working in a bank i came across a very basic problem in the current cheque clearing system. Which is manual signature verification .
Each bank has a team of at least 10 to 30 people sitting just to verify and check handwritten signatures each day. Now think of an operation’s guy who has to check handwritten signatures each day and based on his judgement bank will clear the cheque
Primary responsibilities of a cheque clearing guy
- See if the signature on the cheque is valid – match with the signature specimen submitted by the client
- See if the signatory has the power to sign on the cheque – Based on Power of attorney submitted to the bank
Both the primary responsibilities are manual and bank is solely dependent on that cheque clearing guy to perform 100% all the time . Now having said that i do not have the exact numbers how many cheque returns are happening on daily basis because of human errors .
Impacts of human errors
- A small variation in the signature might lead to cheque return – can lead to a customer complaint
- Cheque return can hit your credit history
- Reputation of the company or an individual is impacted
- Banks have to write apology letters
I have come up with a possible solution , it is just a theory as of now . There is no such system into existence for now
Lets us first define the problem
Situation : A issued the cheque to B
A: Issuer of the cheque
B : Beneficiary of the cheque
Valid transaction : B deposited the cheque in his bank – the cheque went through clearing process . A’s bank confirm the signatures and cheque gets cleared and B gets the money
Fraudulent transaction : B gets a blank cheque of A and he forged his signature and deposited the cheque and gets the money
Current solution : Bank requests individuals to keep their cheque books safe
We all know that we have to keep our cheque books in safe custody .However we should still find a secure way to deal with forged signatures
A possible solution through blockchain and use of digital signatures
Each cheque when issued will have a cryptographic key or code ( you can say ).That cryptographic key is system generated and can only be generated when the account owner will request the system to do so Cryptographic key will have all the relevant information pertaining to that particular cheque. In case of any fraudulent transaction bank will follow the same process, but at the first stage it will check if the cryptographic key is generated and valid for that particular cheque, if not the cheque will get bounced and client will get notified
Now i am not a tech guy who can write codes and build a blockchain network this is just an idea which i think can be implemented . There might be some sort of Government intervention is required and each bank has to participate and agree to the new verification and record keeping system . Here are some other benefits it can provide
- Two way authentication will make the transaction secure , cheque book misuse will be reduced
- Legitimacy of the transaction will increase . Issuer can not deny if he has issued the cheque and
generated the key . Beneficiary can demand the key while accepting the cheque – Key can be
validated by the blockchain network no manual intervention is allowed and key cannot be forged - Blockchain System can be developed and altered in different ways to protect the interest of both
issuer and beneficiary - Once the cheque is passed all the relevant details of the transaction will be stored forever in the
block which an be viewed and never can be altered - creates a strong database of each record
Your comments and ideas are welcome
