As bank-to-bank transactions grow in popularity, the two strings of numbers that facilitate them—bank account and routing numbers—have likewise grown in importance. (And, some might argue, vulnerability.) While bank accounts have existed since ancient Mesopotamians stored their gold, grain, and weapons in temples for safekeeping, they existed without unique identifiable numbers until very recent times—and are largely related to innovations to help process checks.
Bank account numbers
While bank account numbers might only go back several decades, their story isn’t straightforward. When we sought to track down the exact origin of bank account numbers, it proved to be a surprisingly difficult process (and an interesting exercise in what happens on those rare occasions when Google comes up short!). We talked to several professors of banking history, economics, and financial history; an American history librarian at Columbia University’s Rare Books Library, which houses the archives of the New York Clearing House; and the archivists of a few major banks. To our—and to their own—surprise, no one had a definitive answer.
“It seems the introduction of the account number varied by bank,” said Claire Twinn, an archives manager at HSBC. “It looks like HSBC introduced account numbers during the 1960s/1970s when computers were brought into the business.”
She added that HSBC’s first computer was installed in 1967, but that other UK banks may have had computerization and account numbers longer.
Nicholas Webb, an archivist at Barclays, came up with a similar theory. According to archived documents like checks, customer statements, and automation records, Webb’s best guess is that Barclays account numbers were widely introduced between 1961 and 1974, during which bank branches were being connected to the bank’s computer centers.
By the late 1960s in the United States, people were still required to visit banks in person to withdraw and deposit money, likely by providing a name associated with the account and other personal identifying information. (The United States saw its first ATM in 1969.) With computerization also came the invention of Magnetic Ink Character Recognition (MICR), which uses magnetic ink to print routing and account numbers on checks. An electronic reader deciphers these numbers to quickly and systematically sort checks for processing. It might have been these innovations in efficiency that played a role in the introduction of account numbers in the United States. Indeed, if you look at photos of checks dated from 1960 (like this one, from First National Bank, signed by legendary baseball player Ty Cobb), there are only names—no account numbers and no routing numbers. By 1965, however, checks have MICR numbers printed on them with distinct account numbers, like this one signed by boxer Rocky Marciano.
The routing number had already been around for half a century before the account number became standard. Routing numbers were introduced in 1910 by the American Bankers Association (ABA) to avoid confusion in cashing checks. Unlike bank account numbers, routing numbers aren’t unique to users; each bank has its own, publicly-known identifying routing number. Basically, the ABA wanted to avoid the possibility of checks written from Bank of America, say, getting withdrawn from American Bank (or any other institution with a similar name). At the time, the bank business was booming: By 1920, there were nearly 30,000 different banks in the United States—more than in the rest of the world combined. (Today, there are closer to 18,000—though more than 50 percent of deposits are held at the top 10 banks.) So it’s easy to see how ambiguities could arise about which bank owed you money; routing numbers were the first step in straightening that out.
The efficiency that routing and account numbers provided helped launch checks as a primary means of payment in the 1980s and ’90s. Though the usage of checks has significantly declined since then, routing numbers are still very much an important part of the banking system. They currently play a role in facilitating ACH payments, which are on the rise.
But increasing instances of fraud—as well as new technologies that secure payments—is sure to bring still further change to the system, and how account and routing numbers are used.