History of The ABA Number
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 Basically, the ABA wanted to avoid the possibility of checks written from Bank of America, say, getting withdrawn from American Bank (or any other institution with a similar name).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.« Back to Glossary Index