Sinead O'Connor's gloomy "Nothing Compares 2 U" was playing on everybody's Walkman in 1990 – the year Brandt Peterson – the now CFO of the $3.5 billion, Warrenville, Ill.-based Alloya Corporate FCU – was 26 and a treasury analyst for America First Credit Union. The Riverdale, Utah-based America First now has $7 billion in assets and about 730,000 members.

Peterson remembered what it took to process hundreds of thousands of paper checks.

"Literally, these trucks would go down to the Fed," he recalled. "They would come back completely stuffed with checks every day."

There were two deliveries a day; the first batch took five hours to process, he said.

"They started about 5:00 in the morning," he said. "They'd finish somewhere before lunchtime, and then they'd try to balance it all. Then another load would show up, and they'd process all that. It wasn't as much. Then they'd finish at 3:00, 4:00 in the afternoon and go home, be back at 5:00 in the morning," he said.

We Didn't Start the Fire

Check processing was more of a factory operation in 1990. Checks typically went from a teller to the proofing and encoding area and then on to sorting.

"There'd be encoding work stations," Catalyst Corporate FCU Senior Vice President/COO Brad Ganey said. "Sixty machines lined up, and they would just encode all the checks to feed into the sorter room."

Back in 1990, Ganey worked at a bank, later jumping to the Federal Reserve in 1993 and then to what was Southwest Corporate FCU in 2000.

"Everything was about consolidation into large centers," he said. "You had $500,000 to $1 million machines from Unisys and IBM processing the checks."

Peterson remembered the contraptions, too.

"Those machines, they were so fast you couldn't even see the checks," he said. "They were just a blur. It was crazy stuff."

Ganey said sometimes checks would jam the equipment.

"You could get a bad-enough jam that it would catch the wheel just right and get enough friction going that you would put a check on fire," he said. "You'd see the smoke start coming – you'd know you've got one spinning too much. In most cases you can stop it from being an all-out, full-blown fire."

Cameras snapped pictures of each check and stored them on film, Peterson explained. That meant researchers had to sift through rolls of film to find an image.

"Every day that's what they did was go find pictures of checks for members at the teller line saying, 'I didn't write the check for $2,000, it was $2,'" he added. "Literally, they had three, four people, that's all they did all day."

It Must Have Been Love, but it's Over Now

In some ways, 1990 was the beginning of the end of the industry's love affair with paper. Just a few years later, in 1995, Peterson said real changes appeared.

"They came up with this way to store the stuff in the disc on a hard drive," he said. "We looked at it and we're like, 'That's really cool stuff!'"

For the people tasked with finding pictures of checks, what used to take a day took 15 minutes in 1995. Eventually those people moved to other positions, he said.

Sept. 11, 2001, also changed the economy's paper trail.

"After 9/11, literally no checks moved in the United States for about two weeks," Peterson remembered. "You had billions and billions of pieces of paper worth billions and billions of dollars not being paid. After that, the Fed, they basically told the industry, 'We're not doing this anymore. It's all going to be electronic exchange.'"

Check 21 became law in 2003 and took effect the following year. It introduced the substitute check, which allowed financial institutions to process check information electronically. The Federal Reserve also reduced the number of locations in which it processed checks.

"That was one of the huge changes," CO-OP Financial Services President/CEO Stan Hollen said. "You used to have a lot of float in the system. Physically, we were shipping checks all over the country. When the Fed itself began to capture, that was a big change."

By 2005, electronic branch capture was commonplace, Peterson added.

"Branch capture, remote deposit capture, mobile capture, that's really where it started was '05, '06," he said. "Now you just take a picture with your phone, so you don't even go to the teller counter."

That changed office dynamics considerably.

"We used to be a really good tour for people to come in and see the high-speed processing and so much flurry of activity," Ganey said. "Today you walk in and it's a lot of people sitting at PCs. For all you know, they could be processing insurance."

NYCE, NYCE, Baby

Debit networks like NYCE and STAR were in their infancy back in 1990, because debit cards were just being born. Hollen, who was president/CEO of the Sacramento, Calif.-based The Golden 1 Credit Union in the 1990s, remembers it well.

"We were the first credit union that used a Visa debit," he said. "It was probably 1991 or 1992. That was the first time that you could access your checking account at the POS."

Also, Arco gas stations began taking ATM cards – which weren't the same as debit cards at the time – and charging members $0.35 for the transaction, he said. Golden 1 now has $9.5 billion in assets and about 744,000 members.

Most ATMs weren't networked in 1990, Peterson added.

"In the offline world, it just said, 'This ATM card is allowed to withdraw $200,'" he explained. "There was no looking at the dollar amount. There was no looking at your account to see if you even had it. It just said you can take up to $200, so people would overdraw all the time."

Users had to put ATM deposits in envelopes back then, too. Periodically, tellers had to go open the ATM, put the envelopes in a bag and bring it all into the vault, he recalled.

"Then the envelopes had to be opened, and you had to reconcile the check to the amount the consumer typed in, and that took a fair amount of labor to do that," Hollen added.

Peterson recalled, "There was a room that was just enormous, full of stacks of ATM receipts and envelopes."

When there was an error, it meant digging through mountains of paper.

"That is when I decided I never wanted to be an accountant, because these guys had to go through all those papers to find out exactly where they messed up and get it fixed," he joked.

How Am I Supposed to Live Without You?

Ganey admitted he was skeptical of certain changes over the years – particularly when check images began flying around electronically.

"I remember the big concern that I'll admit to having is, some of the systems that came out for Check 21 were bi-tonal and I'm like, 'There's no way. We have to be able to see all the detail!' Especially in the Treasury checks or things like that," he recalled. "Everybody was rejecting them. Everybody was so concerned about getting stuck with a bad check."

That wasn't all. "There was such trepidation with members capturing and scanning at home," he added. "You talk about mobile capture and it was a consistent reaction across the board."

But what happened next symbolizes much of what the last 25 years were like for payments.

"It was amazing how quickly it shifted from, 'You're out of your mind!' to, 'We have to have that!'" he chuckled.