We have discussed RCK (represented check entry) and how some merchants and collection agencies are using this process to collect NSF checks. We have not, however, talked about eFunds, a company that has been a pioneer in the industry.
eFunds is a five-year old southern California company that deals with retail-based electronic transactions, transfer, and conversion. eFunds develops system and software programs designed to enable merchants to complete transactions electronically and simplify check collection. EFunds' founder and Chief Executive Officer is Neil Godfrey, who worked with NACHA and the Federal Reserve to develop a check truncation product. He was previously employed by IMA where he was instrumental in developing the first automatic credit granting computer system for the retail market. Vice Chairman of eFunds is Charles T. Russell, former CEO and president of Visa International.
What they do
According to Stephen Neese, Executive VP Sales and Marketing, "Just as the credit card transactions became an electronic paperless process a decade ago, after centuries in practice, the days of writing and annually processing checks is changing and eFunds is helping to usher in this exciting new era. Instead of processing paper after the check is written, computers and electronics take over that job." eFunds provides services to companies like Electronic Check Processing, SCAN (for the First Hawaiian Bank SCAN eCheck program) and NPC, and sells its service both directly and through partnerships.
R-Check
The R-Check (Re-presented check) program designed by eFunds helps retailers eliminate the problems of handling and processing NSF checks by converting the returned check into electronic funds transfer (EFT) items. eFunds re-presents and collects the check in the same way a health club or utility deducts a monthly payment from the check writerÕs account. eFunds believes electronic conversion of a bad check recovers the funds faster and for less cost, even if the check is three to six months old.
Results are in the eye of the beholder
In an August 5, 1998 press release eFunds reported the results of a 10-month test program with Smith Food, a Salt Lake City based subsidiary of Fred Meyers, Inc. Using the R-Check services of eFunds, Smith Food processed 71,000 NSF checks worth $4.5 million. The results of the test were that 20,155 items were collected, worth $1.3 million. This, of course, represents 29% collections, a number that is weak by many standards, and reflected 20% collections on items over 90 days old.
From a comparison point of view, low-value checks are highly collectable by check guarantee organizations, with many reporting more than 100% collections when including service fees in calculations. With service fees extracted in a proper comparison to RCK collections, the collections results are generally in the 45 to 50% range with 40% of the collections resulting from simple redeposit. These numbers seem to show the same results on slightly aged items, as these early results of RCK.
Of course, the earlier the item is presented the better the collection results, and eFunds has also reported 65% collections in a July press release. In addition, a major benefit of R-Check, as KMart has found, was that businesses recoup money with minimal intrusion on the consumer.
What about the future?
As is the case with all technology companies, the future is difficult to predict due to the fact that technology changes the future. According to Godfrey, "Uses of eCheck undreamed of by eFunds become a reality because customers learned how to use the process to accomplish things we never imagined."
One such example is cash concentration. eFunds developed eCheck to speed up the processing of checks. "We never thought about the system having the effect of concentrating bank accounts for merchants with multiple stores. Many merchants have learned that using the system enables them to do a better job with cash management than before they adopted the process."
Godfrey believes that electronic commerce is not going to replace stores and shopping malls. "What electronic commerce does is open new doors to people. It allows homogenous known products to be sold at lower prices, thus creating a market."
"We at the company are dedicated to providing merchants with the ability to take checks in a fast, inexpensive, safe, and certain way, giving the consumer more options and the merchant more flexibility." Godfrey continued to explain, "Fast means that the transaction (check) processes at the same speed a credit card processes. Inexpensive means that the process is less costly than the paper version and that the entire process (from first presentment to final disposition) costs society less money. Certain means that the process is known and true and it always gets through. Safe means that the check writer does not have to worry that the transaction will be spoiled either with incorrect amounts taken from their account or no record of what happened. These are the visions of eFunds Corporation." For additional information, call Stephen Neese, Executive Vice President, Sales & Marketing, at (714) 566-3823 or visit their Web site at www.eFunds.com.
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