The Check Clearing for the 21st Century Act, also known as the Check 21 Act, was passed in October 2003 and made it legal for banks to send and accept digital scans of checks through the Internet for verification purposes, avoiding the need to mail the physical check, which is more expensive and time consuming.

Under the five-year, US$174 million deal, IBM will build a payments system that uses Viewpointe's archive of nearly 80 billion check images, which comprises almost 70 percent of the total check images in the U .S. today, according to the companies.

That archive, which is accessed by banks more than 3 million times a day, is growing at a rate of 2 billion checks a month, the companies said.

Currently, banks still use e-mail or digitally transmit the images to each other. But the payments system will obviate that by letting banks that upload checks to the Viewpointe archive then clear them via Viewpointe. That will also release the banks from the need to maintain advanced telecommunications and security infrastructures related to the transmission, receiving and storing of check images.

"It's a strong bet because 'on-demand' economics are favorable, and banks will eventually be comfortable not receiving and archiving all their check images," said Alenka Grealish, an analyst with Portland, Ore.-based Celent LLC. "Currently, early mover banks in check-image exchange are sending and receiving check images plus a data file, which costs relatively more in terms of telecommunications and archiving than the on-demand model. Although not all banks will embrace the 'on-demand' model, the fact that Viewpointe bank participants process over 60 percent of all checks will make it the dominant model."