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Payments Technology - Trends and Analysis |
New Era for Check to ACH ConversionBy Patti Murphy The shift from paper to electronic checks is taking on added importance, as new automated clearing house (ACH) rules make it possible for merchants and other businesses to convert more paper to ACH debits. The rules, implemented by NACHA effective March 16, allow businesses that accept check payments at the point of sale or at manned bill-payment locations to convert checks to ACH payments using back-office technologies. The process, known as back office conversion (BOC), expands upon previous iterations of ACH check conversion such as point-of-purchase (POP) and accounts receivables conversion (ARC), introduced over the past 10 years. Check conversion transactions have been driving significant growth on the ACH. NACHA estimates that upwards of 3.2 billion payments that started out as checks in 2006 were converted to ACH payments – a 36% increase over 2005. Like check conversion options previously approved by NACHA some checks don’t qualify for BOC, namely those with auxiliary on-us fields in the MICR lines (indicating the items are business checks) and checks for amounts greater than $25,000. NACHA’s BOC rules also include provisions for notifying customers that their check payments may be converted to electronic (ACH) debits. And consumers must be allowed to opt out of having their checks converted to ACH payments. A big selling point for BOC is that it doesn’t require merchants to return voided checks to consumers, as had been the case with POP. Instead, voided checks are retained, then batch imaged later in the day. Decisioning tools can be used at that time to determine the best way to clear checks – as electronic check images or as ACH debits “For many businesses, Back Office Conversion will enable them to have a single process to electronically deposit all of their check payments,” said NACHA President and CEO Elliott M\cEntee. NACHA has a new publication it hopes will help businesses make the most of BOC. “Guide to Implementing a Back Office Conversion Entry Program” describes economic, operational, legal and risk management considerations that can arise when implementing BOC. It’s available at from NACHA http://pubs.nacha.org/echeck.html The Takoma Group © 2007 |
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