Electronic Checks: An Efficient Payment Option
According to the Federal Reserve, a growing percentage of payment transactions are electronic, but Americans are still writing 42.5 billion checks a year. This helps explain why the banking industry has been developing a new generation of payment services. Collectively known as “check conversion,” “electronic check” or “e-check” services, they offer many of the benefits associated with electronic payment.
An e-check is a payment that starts as a paper check—or, in some cases, checking account information—and ends as an electronic debit against a deposit account. E-checks are delivered via the Automated Clearing House (ACH) payment network. NACHA—the Electronic Payment Association reports that e-check transactions made up more than 18% of all ACH network transactions in first quarter 2004, up from more than 15% in fourth quarter 2003.
Electronic checks are intended to lower check and processing costs, reduce fraud losses, increase use of technology to process payments and produce greater consumer satisfaction.
Below are brief descriptions of five e-check services that you may want to learn more about. Each service’s NACHA standard entry class (SEC) code is presented in parentheses.
Telephone authorization (TEL). TEL is a single-entry consumer debit initiated by a verbal telephone authorization. TEL allows a company to call a consumer about a past-due account and give the consumer an opportunity to initiate payment during the call. In a TEL transaction, the consumer provides check MICR line information—bank routing number, account number and check serial number—so the company can initiate an electronic debit of the consumer’s account.
Internet-initiated entry (WEB). Similarly, WEB allows consumers to go to a company’s website, authorize a payment for a particular amount and provide the check information the company needs to initiate an ACH debit against the consumer’s account. Some credit card companies provide this payment alternative.
Accounts receivable conversion (ARC). ARC is the electronic conversion of checks mailed to a biller or deposited at a dropbox for payment. An example of an ARC application would be converting a check that a consumer sends to a department store’s lockbox. The lockbox provider would scan the check and turn it into an electronic item for further processing.
Re-presented check (RCK). RCK allows a company to re-present an NSF or uncollected funds check of $2,500 or less from a consumer as an electronic entry. RCK is designed to reduce paper-processing costs and improve collection rates by re-presenting checks faster.
Point of purchase (POP). Merchants at the point of sale can use this e-check service. The consumer submits a check payment to a cashier, who scans the check to capture MICR line information. The cashier returns the check to the consumer and uses the scanned MICR line information to process the payment electronically.
While these are not products offered by Cole Taylor, this information on electronic checks can assist you in reconciling your bank statement and understanding this process.
An e-check is a payment that starts as a paper check—or, in some cases, checking account information—and ends as an electronic debit against a deposit account.
Visit us at
www.coletaylor.com