Will That Be Cash, Charge, or Electronic Check?
To help merchants lower check processing costs and reduce losses, NACHA's Electronic Check Council has developed pilot guidelines that will allow retail merchants to turn paper checks into electronic entries at the point-of-sale.
Today, retailers bear the costs associated with deposit preparation, transportation, deposit fees, return item handling, collection efforts, and fraud control. Also, any delay in the time from the deposit of the paper check to the actual receipt of the returned check negatively impacts the merchant's ability to prevent and collect returned items and control check fraud.
Through existing electronic networks, merchants can be enabled to expedite the check clearing process and experience significant savings.
The retail environment has seen tremendous growth in the use of electronic POS terminals and check MICR readers. MICR readers allow for check verification using third party authorization systems-providing valuable risk protection. With that same equipment, merchants can convert the paper into an electronic entry, benefiting from at least one major advantage: if the electronic payment is returned unpaid, the merchant will receive the return in half the time it takes for the paper return to be received.
From Check to ACH at POS :
The path to the electronic check begins with a scan of the MICR line on an existing paper check presented for payment. The POS system then produces a receipt for the check writer to sign, authorizing in its place, a preauthorized debit through the Automated Clearing House Network. This receipt may also include authorization to collect, via a separate ACH debit transaction, a service fee in the event the electronic transaction is returned.
When the payment is authorized, the merchant stamps the check "VOID-Converted to Electronic Payment," and the check is handed back to the consumer. Each party keeps a receipt of the transaction.
During the pilot, the PPD Standard Entry Class code will be used to facilitate this consumer transaction. The PPD entry is the SEC code used for consumer preauthorized debits and credits and is accepted by all Receiving Depository Financial Institutions.
Originators and Originating Depository Financial Institutions that participate in pilots will provide measurement and reporting of pilot results.
RDFIs will also be surveyed, in order to measure impact on RDFIs and Receivers.
The pilot objectives are to:
Merchants and their financial institutions are currently signing up for the pilots. Interested parties should contact Frank Beverly, Net Star Corporation, 916-974-1917 (voice), 916-974-1145 (fax), or 105177.635@compuserve.com (e-mail).
