How will Large Retailers break off their love affair with paper Checks?

Since the days of the Sears catalog the paper check has been an important payment method for major retailers. Today handling paper makes it one of the more expensive methods of payments and due to market forces most major retailers have already invested heavily in credit and debit card payments. So…how do Large Retailers continue to accommodate their paper check customers while breaking off the love affair?

We believe check 21 and ACH combined has the ability to turn the love affair into a marriage! We do not believe this will be done through the point of sale systems. Changing or modifying point of sale systems is expensive and isn’t necessary with todays image based technology. Not only that but Wall St would not look favorably upon a CEO that wanted to make a significant Capital Investment in paper checks – even if it meant converting them to an electronic transaction. Paper checks are seen as an obsolete payment method (that’s why Wall St invested so heavily in Visa and MasterCard).

We see major national retailers going to a system that continues to verify checks at point of sale and then the checks take one of the following paths:

They are sent to the back office and, using technology such as ACHeck21, imaged and sent to the bank electronically. Reports are generated, financial systems updated, images archived and returns managed electronically. The system will settle checks as either ACH or Image files using intelligent routing to select the least expense option based on the rules. Paper checks will be destroyed at the store or off site.
Or……

Using technology such as ACHeck21 capture the routing, account number and amount from the point of sale system, settle checks to the bank electronically and then either image the checks in the back office or off site and allow the system (ACHeck21) match up the settlement file and images for use in collecting returns, answering customer questions and updating financial systems.

There are early case studies on the advantages of converting checks to electronic transactions. Most indicate handling costs savings of 0.10 to 0.50 cents per check!! This doesn’t include the organizational savings from business automation such as updating financial systems, archiving images, managing returns, research, reporting and disaster recovery to name a few. In fact processing paper checks electronically costs less than processing a debit transaction! If business automation savings are quantified and added to the savings in handling costs; the overall savings may actually exceed costs, thus giving an immediate ROI.

So, the moral of the story is Large Retailers may break off their affair with paper by starting and affair with either Back Office Conversion (BOC) or point of sale conversion and imaging.