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Productivity Projects Push Changes in Check Processing

In 2009, a staggering 27.8 billion checks were written in the United States. Of

these, only about 3.3 billion were converted to ACH (automated clearing house)

electronic transactions.

Over the past couple decades, banks became very efficient in processing paper

checks, to the point where no further efficiencies could be achieved. In 2003,

Congress passed the Check Clearing for the 21st Century Act, usually referred to

as the Check 21 Act. This allowed payment processors to convert paper checks

into an electronic substitute check, known as check truncation.

There are numerous benefits for imaging checks over physical check processing:

  •  Lower costs

  •  Fewer operator errors

  •  Better customer satisfaction

  •  Faster Settlement

  •  Rise in productivity

  •  Fast consumer access to canceled checks online

  •  Remote check image capture

  •  Remote deposit without the physical check

  •  Curb check fraud

The improvements in paper check processing continues but Check 21 was the

first giant step forward. As of 2013, about 70 percent of payment processing

institutions could accept electronic images as legal tender for paper checks.

Every year, the percentage of paper checks clearing electronically doubles over

the past year. The one drawback was that the check still needed to be

transported to the payment processor for conversion into an electronic image.

In 2006, the Electronic Payments Association, created a new type of processing

known as back office conversion (BOC). BOC lets merchants and retailers

convert paper checks directly to ACH debits at the point of sale. Back office

conversion means that businesses can accept eligible paper checks, then

process them immediately for faster settlement and processing. The Electronic

Payments Association estimates that the BOC process saves the banking

industry between 3¢ and 5¢ on every converted check. With 27.8 billion checks

in the system, even 3¢ savings per check is a big number.

For more information about electronic check processing and merchant services,

contact Mike Krause, email, 585-704-6453.

Please visit to learn more.

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