Q: Why Should
     Check Conv



A:  Revenue!

 ISOs Sell Electronic
ersion with Image? 



by Jake Haycock


Retailers across the nation are deploying Electronic check conversion with imaging solutions (ECC) — the process of converting paper checks to electronic items at the point-of-sale (POS). After a check has been electronically converted at the POS, the physical check is given back to the consumer and the electronic payment is processed using the ACH (Automated Clearing House Network. There is an image of the check available to the merchant or their check processing company when needed for collections, administrative returns processing or dispute resolution.
   Most check processors are selling check imaging as their only alternative for a check conversion or “ECC” (rather than with traditional non-image based check readers) since the State of California and now other states, are insisting that they cannot prosecute an NSF check without either having the original check or a reasonable facsimile (hence an image of the check). Image is everything!

Check the Facts!

  • Check volume is 70 billion annually and growing
  • Almost 1/3 of all checks are written at the POS
  • Consumers prefer to pay by check 4-1
  • Checks account for the majority of non-cash payments for most retailers

A Checkless Society? Not Likely!

   Discussions focused around the idea of a checkless society first began in the early 1970’s. It was foreseen that the check would eventually be gone by the start of the next decade. Thirty years later, these discussions continue, however check volume continues to dominate over all other forms of payment. So many Americans still use the checks for payment for a couple of reasons. The idea of the “check float” is very inviting to the consumer. Using the float system, a consumer can write a check without actually having the money in their account. Many consumers are reluctant to give up this option. Other reasons include the simplicity, universal acceptance and low cost of check usage. Merchants are not willing to change these benefits to the consumer for fear of jeopardizing their business by not accepting checks at the POS.

ECC — A Sleeping Giant?

   The ECC market is experiencing explosive growth to meet the needs of merchants accepting checks at the point-of-sale. According to the National Automated Clearing House Association (NACHA), in 2000, approximately 32 million checks were converted to electronic payments using ECC. NACHA expects a growth rate of over 100% annually in ECC transactions. Up to 18 billion checks are written at the POS in the U.S. annually — a figure that points to the tremendous untapped potential for ECC.

ISO Success Story

   As consumers continue to write checks, merchants need a viable option to combat the rising costs associated with check acceptance. While check writing is growing by about 2% annually, check fraud is growing 10-12%. Consequently, on-line authorization of checks is a competitive necessity. Check conversion with image and on-line authorization/capture represents a clear cost-justification when one adds up the fraud reduction, cash flow increases, productivity improvements, increased collections and new revenue made possible from automated return fee collection.
   Oklahoma based Merchant Services Inc. a Delta Card ISO has been implementing electronic check conversion with image solutions in many of their merchant accounts. “Our merchants love it,” says Larry Garrison, President & CEO at Merchant Services Inc. “The solution is very easy to use and they no longer have deal with the physical check. Using ECC with imaging, a check can be converted at the point-of-sale in the same time it typically takes to process a credit card transaction.” Ron Williams, President of EZCheck, a check guarantee provider who processes check transactions for Merchant Services Inc. says, “ECC with imaging benefits all parties involved in the check conversion process. The benefits for the merchant and processor become apparent in the increased efficiency derived from not having to handle the paper check. The paper is given back to customer at the time of the transaction but the check image is available to us 24 hours a day. These benefits make this solution a easy sell for our sales reps.”

New Revenue Stream for ISOs

   As check volumes remain steady, the electronic check conversion market will continue to grow. Merchants will embrace ECC technology in their never-ending quest to reduce the cost of accepting checks at the POS. This opens a new revenue stream for ISOs. “By marketing ECC with image, we are acquiring new credit card processing that would not have been available to us had we not been able to offer check conversion services,” says Garrison. His agents can now offer a full credit/debit/check conversion solution to their new and existing customers. This results in new residuals, future growth and high profitability. And this is just the start. Electronic check conversion with imaging has experienced the most growth in the point of sale market, nevertheless, ECC has begun to branch out into other markets such as banking, utilities, property management and professional services. As for discussions about a “checkless” society, save your breath, checks are not going away for some time.


Jake Haycock is the Marketing Manager for RDM Corporation, a POS electronic check conversion systems and web-based image archive services provider. Visit the RDM website at www.rdmcorp.com.