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 Mike@SalesSensePayments.com, 585-704-6453.
Please visit www.SalesSensePayments.com to learn more.