transaction and is provided with a copy, with their receipt, as a record of the purchase. The merchant uses the check information, along with the transaction amount, to initiate an Automated Clearing House (ACH) debit, which is processed electronically

It's no surprise that many

businesses are eager to adopt

electronic check conversion.

When checks are converted

from paper into an electronic

transaction format, handling and

transaction costs decrease and

the percentage of successful

collections increases.

through the ACH Network. A complete description of the transaction appears on the consumer�s monthly statement from their financial institution.
   A consumer�s check is processed through the same safe and secure system that banks use today for electronic deposits and payments. Consumers have the same amount of time before their check is presented to a bank � about two business days. Additionally their bank statement provides even more information � the date the check cleared the consumer�s account, its amount and the place the check was presented.
   Electronic check conversion has not received wide spread adoption with merchants and consumers. According to NACHA, retail sites using electronic checks reached 24,656 in January 2000, up from the 6,215 POS locations the previous year, but a minimal percentage of the total number of retail locations that participate in check authorization. Several companies, including BankServ Inc. of San

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Francisco, TeleCheck Services, the check services unit of Atlanta-based First Data Corp., and E-Funds Corp., the recent e-payments spin-off of Deluxe Corp., have made substantial inroads with POS check conversion. Today, at least 50,000 merchants subscribe to ACH-based conversion services from these three companies. However, the vast majority of retail sites participating in electronic check conversion are single terminal dial-based retailers with minimal check volumes. Adoption, if it comes, will only come when nationally based retailers that accept the greatest percentage of checks, implement check conversion. This is not likely.
   A recent electronic check conversion pilot test by a supermarket chain (that wished to remain anonymous) found that consumers did not understand what was happening and were unsure of the transaction. Although education and time will solve this issue, a larger issue looms in the background. Electronic check conversion has not been endorsed by financial institutions, which prefer that consumers pay with their credit card, offline debit card, or continue to use the established check acceptance process. Because the physical check does not actually enter the paper check clearing process this cuts out item processing fees � a huge revenue producer for banks and service bureaus.
   Beyond this, there are other �barriers to implementation� that these providers will need to tackle. These include:    Electronic check conversion does not accommodate business checks. Although the volume of personal checks dwarfs that of business checks, it causes cashier confusion because the process is different (NACHA is currently working on ways to accommodate business checks).    A consumer can opt not to participate, again potentially causing cashier confusion if the check being tendered becomes an exception item, the cashier needs to be able to recognize that it is an exception item and resolve it to the best interest of the store and the consumer. Is the financial institution or the consumer the keeper of the voided check? If it is the financial institution, check handling time and cost are not reduced.
   Larger retailers will require integration of the electronic check conversion system with their legacy system, not a small task. Additionally, they will need to educate and train accounting, cash management, clerk, and the consumer.
   The merchant�s reconciliation of their bank statement may become much more complex - electronic checks tendered, paper checks tendered, exception check items, etc. - will result in different cut-off times and balancing daily and monthly activity.

   In the next issue of Transaction World Magazine, we will discuss two alternatives to Electronic Check Conversion � SafeCheck and the Visa Check Service Initiative.

Mike English is the Director of Corporate Communications at IVI/Checkmate, a major transactions solutions provider in North America. Visit IVI/Checkmate at