Forte Financial Blog

Payments in Transition Town Hall Meeting (TAWPI Conference)

[I am in Las Vegas for the TAWPI Payments in Transition conference – these are my notes from one of the sessions. An index of all of the sessions and links to the rest of my notes is here. - EMc]

Payments in Transition Town Hall Meeting
Joseph Sass, Senior Regional Manager, US Bank
Jay Matyas, VP & Sr. Product Manager, PNC Bank
Steve Nugent, Director, Product Mngt., First Data Corp.
Ronald Victor, VP, Receivables Product Mngt.,JPMorgan Chase
John Mintzer, VP, Citizens Bank
Moderator: Mark Brousseau, Brousseau & Associates

[blurb] This lively panel discussion will overview the current payments landscape, highlight major trends in instruments, volumes and marketplaces and then will discuss how these trends offer both opportunities and challenges for financial institutions and corporations

My notes/observations:

Q what is the big trend?

Steve, 1^st Data/Remitco - Tipping point, in-house providers start looking to outsource as unit costs go up. As number of checks decrease. Most consumer checks processed in-house today. OS and lock in rate for 3 years. Hard to make business case internally – let go of something you’ve done for so long. Not easy, but right thing to do. Checks declining but consumer payments are increasing (10% increase over next 4 yrs). Prime market for Lockbox providers.

Ron, JPMC – certainly on consumer / retail side yet. Wholesale, gov’t – changes in receivables management. B2B single digit decline, but value is data from receivables. Receivables collaboration: single repository – lockbox, wires, ACH. Consolidated, not only by payment type but also across geographies. Invoice matching services are very important. [follow up Q – aren’t you competing against yourself? ACH vs. lockbox? A: Trying to find the right solution for each customer.

John, Citizens Bank – more expensive to run in house lockbox. One key area that billers should be looking to outsource – disaster recovery and contingency planning. Better to outsource than duplicate own facilities/resources. Go with provider that has multiple sites (one rational for citizens to os)

Joe, US Bank – retail volumes up a little bit YOY, at least at US Bank. Biggest challenge during transition (last12 months) is to keep very close eye on volume and match labor accordingly. Monitoring FTE on a weekly basis rather than monthly. Measuring items per hour. Very cautious on replacing open positions. Management of lockboxes is challenging – try to develop internal talent (promote supervisors) rather than taking months to hire managers from outside and paying a lot. Juggling match.

Steve, 1^st Data/Remitco – Labor is 60% of retail lockbox cost. Now that image, MICR, CAR.LAR not much more innovation on the way. This is it; won’t get much more cost effective.

Q. Services mix is changing. Move away from LBOX as deposit solution and more to data capture/receivables solution.

Ron, JPMC – Customers want 8.5 x 11 paper scanned. And if you can match it, even better.

John, Citizens Bank – incorporate changes to retail lockbox. Consumers want to pay in a variety of ways. But billers aren’t embracing whole spectrum of payment methods. How to incorporate into the retail lockbox? Debit/CC trans thru web interface, or thru IVR, or thru eCheck. Hyperlink from customer website to processor website (and then tie to retail lockbox data transmission). Fair amount of interest – particularly among billers receiving payments from Checkfree, Online Resources (keep fully electronic, rather than drop to paper). Utility companies are very interested – often attempting on their own, thru service providers. Very receptive to bank service offering, with tie in to retail lockbox.

Joe, US Bank – Correpsondence. No one wants it back. Scanning information and posting to bank website for billers to view. Don’t want rejected payments (unbalanced multis, check only) – want wholesale services on retail lockbox to handle exceptions.

Q – What about interest in Inter-day exception management?

Adoption rate is sky – rocketing. It’s in every RFP. No one wants paper back (package maybe processed next day, or second day, or even later). If can resolve same day and get funds same day. Improve customer performance, improve working capital. Used to think it is too hard for lockbox processor. But now expecting lockbox to handle.

Ron, JPMC – Retail lockbox have had it for awhile. In Wholesale offering for real estate, property management (specific verticals). Another key factor is paper truncation. Eco-friendly pitch to wholesale customers. Up-sell image services as green.

Q – Archive non-payment related documents, too. New product announced recently.

Ron, JPMC – doc management is non-financial scanning. Health care documents that gov’t wanted digitized. Back log + ongoing transactional support. Leverage existing platform. Started offering service because Pittsburgh Steelers wanted online archive of photos, press clippings, etc. approached JPMC who partnered with Kodak.

Distributed capture – rush to scan checks. But what about the other info? Scannable coupon, remittance, etc. Starting to be closer to wholesale lockbox services. In fact, JPMC is developing a distributed capture product that looks like wholesale lockbox product targeted for November.

John, Citizens Bank – Remote capture and remote capture developed separately. As yet, haven’t tied in capture of info into lockbox. Silo challenges.

Joe, US Bank – still haven’t consolidated. Lockbox and remote capture is separate.

Steve, 1^st Data/Remitco – Remitco is wholly integrated. Brokerage industry – lots of money, lots of branches. Big dollars sent overnight to lockbox processors. Can offer same day, fees are lower. Tied to lockbox. Checks and stubs. Can take full page docs and incorporate them but no one has taken them up on it yet.

Q – Where are we in automating healthcare payments?

Ron, JPMC – public sector (child care, parking tix,) created healthcare centers of excellence. Acquisition to bring to market faster; long sales cycles, customers have their one challenges (patient accounting software integration). EOB ICR templates to recognize information and creating image file to customer. Want to get ERA (835) elec remittance advice from customer. Varies by customer. Many hospitals with varying levels of adoption 0% - 80% direct to electronic. Huge market out there: $4 billion claims, 2 trillion dollars. But need to walk before you run, challenging environment. If you want to digitize paper and capture EOB – easy entry. But if you want to provide end to end solution, with claims management there are significant learnings. Two biggest players acquired by banks (JPMC and BofA).

John, Citizens Bank – retail lockbox, healthcare is pretty straightforward. Basic payments, strip data from OCR line and create 835 for hospital. Not as far down the path on wholesale side as JPMC. Working with vendor, trying to find better easy to capture info (image EOBs, claims matching on 837s)

Joe, US Bank – infancy. Two sites coming online with EOB processing.

Q - How well are lockboxes doing to create parallel processes?

Joe, US Bank – ops side. Complexity is being reduced. But challenge is for the product folks – how to position services, how to integrate. Create road map for product.

John, Citizens Bank – will get increasingly difficult on ops side. New responsibilities and lockbox becomes repository of data. Balancing, settlement, parsing of files. Checkfree files – parse to individual customer lockbox, ensure match to check deposits, and all balance to transmission to customer. Burden on operational area to ensure funds are good and information is good.

Ron, JPMC – increase in labor, for healthcare for sure. Decision management. How long store? When truncate paper? Notifications and compliance issues (broker dealers with SEC rules, HPPA for health care). Customers own compliance / audit

Steve, 1^st Data/Remitco – least cost routing – more demand from customers on how to handle clearing of items We hand off to bank,

Q – what’s going on with pricing? Retail perceived as a loss leader.

Steve, 1^st Data/Remitco - not at remitco. We do a pro forma on a deal by deal basis. Determine if you are making money. Larger deals with significant buying power, may purchase other services, leverage against potential loss for lockbox. Pricing is done with as much info as possible. % volume of each exception category to determine resource needs, swag at productivity rates, I’ve heard there is a loss leader, I believe there is a loss leader out there. Not at this table! Price is what makes the deal. We all offer relatively same services, in same locations, same equipment, same software. May trip and fall once and awhile. How quickly can you get back on your feet and make sure it doesn’t happen gain. It’s all about price.

Ron, JPMC – measure on variable basis, or fully loaded? 88% of respondents believe wholesale banking is profitable. Other electronic products with higher margin. Float, liquidity. Have to evaluate the total deal, total relationship. Stand alone, wholesale lockbox isn’t always profitable.

Q - Talk to me about float? How big a factor is it?

Ron, JPMC - Still pretty key. Measure on every deal we price. Included in our internal P&L measurement.

John, Citizens Bank – in our market, run against people who are giving away float, so we do too. Everything next day availability (retail). Difficult to be profitable in a retail lockbox (scan coupon check, single check only; wholesale customers wanting to be retail so they can pay less. Bringing huge volumes. Yet there is a big upfront effort to bring retail customer online (up front costs, testing, programming, scan lines, etc). Technology getting expensive for doing things outside what is typically retail lockbox. Hyperlink on customer location that allows cc trx processing (need too build interface to), eCheck gateway to ACH system, - always costs. Lot of things that work against profitability of retail lockbox.

Q – Business process outsourcers are coming into market - takeover bank or business lockbox servicing. Does this make sense, how do they make money?

Steve, 1^st Data/Remitco – evidently you can make money, people are doing it. Mature, declining market (extremely mature on the verge of ancient). But there must be a business case somewhere.

Ron, JPMC – makes sense for larger institutions. Indirect expense. OS and get off balance sheet. JPMC wants to be last man standing, work with customers to get rid of paper.

John, Citizens Bank – if vendor already has investment, adding incremental volume makes sense. New BPO entering the

Q - SaaS – getting corporate to do the capture. Is that a model you’ve looked at?

John, Citizens Bank – difficult operationally.

Ron, JPMC – remote capture, get beyond traditional footprint, compete where you could not historically compete. So applicable in wholesale. Perhaps buy less hardware.

Q Steve, what is biggest threat to 1^st Data/Remitco?

Steve, 1^st Data/Remitco – we joked about this all night last night. The decline in checks. We’re the largest processor of mail in consumer payments in the country. Will be billions for time to come, but it is declining.

Q – Ron, biggest threat to lockbox processors, like JPMC?

Ron, JPMC – We have a lot of market share that everyone is trying to pick at. Merger took care of some of that. We need to compete against non-bank providers. They don’t have to have a clearing system. Can use remote capture. Smaller banks can compete in mid-small biz. Positive – mostly large volume. 16% market share (BofA has more) but customers are still doing a lot of their own processing. But they won’t be forever, and that’s good for us.

Q – non bank competitors, intermediaries

John, Citizens Bank – look at what they don’t do. Incorporate into bank-centric offering. Decline in checks, competition of intermediaries Break down silos between paper and electronic. One track with integrated solutions for all types of payments.

Q - Biggest threat to operations manager,

Joe, US Bank – where do I start. Volumes and capabilities. Customer wants capability – if you can’t provide you won’t get business.

Q – impact of BOC

Steve, 1^st Data/Remitco – not that big a deal

Ron, JPMC, what is BOC? [laughter all around] Oh, back office conversion. No impact.

John, Citizens Bank – not much impact.

Joe, US Bank – none.

Q – 18 months from now what will be the big news in payments?

Steve, 1^st Data/Remitco – Image Capture – remote payment capture (tie in payment that someone gets in branch to AR transmission. Invaluable for billers and lockbox).

Ron, JPMC – online user experience, next generation remote capture, impact of paperless on workflow (vendor models currently setup for batches)

John, Citizens Bank – image exchange, new products in property management, broken down silos

Joe – continued consolidation of industry. Worried about adequate resources. Labor. Where are the talented young people that want to enter changing industry.

>> Return to index of TAWPI conference sessions

Back Office Conversion: Too Little Too Late? (TAWPI Conference)

[I am in Las Vegas for the TAWPI Payments in Transition conference – these are my notes from one of the sessions. An index of all of the sessions and links to the rest of my notes is here. - EMc]

Back Office Conversion: Too Little Too Late?
Bob Meara, Senior Analyst, Celent

[program blurb] A new report from Celent, “Back Office Conversion: Too Little Too Late?,” includes results of a survey of 300 retail treasury staff conducted by Celent in July 2007. The survey revealed surprising interest in retail check conversion, given POP’s seven-year history of lackluster transaction volume. This session will review details of the survey findings.
[presentation]

My notes/observations:

BOC was developed to address failure of POP: no impact to POS workflow, no impact to consumer, no POS hardware or system integration. Yet compared to ARC and RDC, BOC has achieved only lack-luster adoption one year along. Why?

BOC is RDC – can be back office at retailer (as it was designed) where check conversion is primary, can be part of larger RDC or image cash letter solution (one of many capture points).

Retailers expect banks to provide solutions, yet Cash Management banks have a broad portfolio of products and bank solutions address only a small portion of check acceptance costs. Other parties are better positioned to address the problem: mostly 3^rd party providers. Banks ill equipped to serve multi-locations, whereas other providers have many years experience servicing retail POS locations.

Solution providers and their various approaches. 5 big banks are offering BOC, plus lots of other providers. 3 approaches: 1) capture, correct, balance at back office 2) capture and have 3^rd party correct and balance 3) deferred capture at 3^rd party location, utilize MICR line capture at POS coupled with balancing and correction later. By a 2 to 1 margin Treasurers prefer store level balancing – perceive that if store level personnel balance it will be less work for corporate later. But store operations are resistant to taking on more work. Thus, the importance of a consensus approach with treasury, retail operations, IT [music to my ears as a change leadership consultant] – often retail store ops will veto any changes to POS process and technology. What about vault capture? Most retailers do not use couriers (or at least not at every store location). Mostly store personnel used to make deposits.

Two thirds of retailers check verification/guarantee services. Mostly TeleCheck and Certegy. Already have MICR capture devices at POS and have integrated software. Or ISO model… ISO sells solution. ISO or 3^rd party serves as aggregator and partners with a presentment bank. Send ACH rather than cash letters to multiple banks. Not requiring retailer to change banking relationship.

Declining check usage at POS is large factor in lack-luster BOC adoption. Checks less than 10% of POS transactions (15-20% CAGR rate of decline depending on retail segment). Vs. 1999 when POP was introduced, or 2004 when RDC was introduced:

Why invest? Small segment of payments – more logical to outsource. Favorably impacting BOC adoption utilizing the 3^rd party model.

POP Renaissance – why now? Retailers have what they need to implement BOC (MICR capture, POS printing capability), customer fear is less of an issue, but how do I handle returns??? If using POP bundled with check verification/guarantee services, the process looks better. ACH is ideal for returns, additional presentment, already using lower cost method and increase collection rate. With checks volume continuing to decline, retailers increasingly consider check processing an annoyance, and desire to outsource all together. And you can’t underestimate the Wal-Mart effect – if they are doing it, it merits a second look. BOC actually prompted treasurers to re-evaluate POP. Nearly 2/3 of retailers surveyed were actually comparing POP and BOC in competing pilots.

BOC at Financial Institutions. ARC and BOC for intelligent routing. Decision gateway. Most FI not ready for these solutions. Still working on day 2 image workflows. Need to fully leverage Check 21 before attempting more elaborate solutions. But it’s the way things are headed.

ACH returns going up, increasing costs. Check feeds going down. Most RDC clients are low check volume, don’t care about marginal settlement improvement. But what about Image Cash Letter? Mostly using ARC already in conjunction with tools they have in house to manage availability.

BOC at FI is not compelling. But 3^rd party processors wanting to aggregate large volumes of items (where pennies count) are interested in BOC. Ultimately this will lead to modest trx volume, but it will take a long time.

Retail check conversion will peak in 2009-2010:

Legend:
Light gray bars – checks as a % of POS
Dark gray bars – % POS items converted
Yellow line # retail checks converted

>> Return to index of TAWPI conference sessions

Blogging from the TAWPI Payments in Transition Conference

I am in Las Vegas for the fifth annual TAWPI Payments in Transition conference (with the largest attendance yet: approximately 140 billers, bankers and vendors). TAWPI - the Association for Work Process Improvement - is focused on payments automation, distributed capture, and imaging/forms processing. The Federal Reserve's latest research indicates that 50% of consumer-to-business (C2B) payments are still paper. And since most B2B transactions remain stubbornly paper-based, TAWPI provides a collaborative forum for banks, corporates, and vendors seeking best practices for managing paper checks and remittances.

Recurring themes:

• Payment data alone is insufficient without remittance/customer information. There’s been significant attention paid toward electronifying the check, but what about the supporting documentation?

• Much of the discussion is on how to manage dual processing streams paper decreases but linger on at increasingly at lower volumes for the foreseeable future.

• Declining check volumes increase unit costs and drive consolidation among a handful of key providers. Most (vendor and bank) representatives expect that large billers will move toward outsourcing their lockbox/remittance processing as they lose economies of scale.

• With the emphasis on migrating from paper to electronic, it’s no wonder Check 21 is a hot topic. Almost all speakers note the wild success of remote deposit.

• No one size fits all – solutions must vary to meet specific needs of customer segments.

Click on the session title to view my notes/observations from each presentation:

TUESDAY

Keynote Address: Managing the Changing Mix of Payments
Brian Hurdis, President, Metavante Image Solutions

Back Office Conversion: Too Little Too Late?
Bob Meara, Senior Analyst, Celent

Distributed Capture: Trends, Opportunities & Challenges
David Peterson, Executive VP, Goldleaf Financial Solutions

The Convergence of Payments & Forms Processing
Mark Fairchild, Chief Technology Officer, BancTec

Payments in Transition Town Hall Meeting
Joseph Sass, Senior Regional Manager, US Bank;
Jay Matyas, VP & Sr. Product Manager, PNC Bank
Steve Nugent, Director, Product Mngt., First Data Corp
Ronald Victor, VP, Receivables Product Mngt.,JPMorgan Chase
John Mintzer, VP, Citizens Bank
Moderator: Mark Brousseau, Brousseau & Associates

Business Drivers for Payment Automation
Andrew Pery, Chief Marketing Officer, Kofax

Check 21 Road Map: One Bank's Journey Into the 21st Century
JR Thornton, AVP Indirect Client Services, Wilmington Trust

Check 21: Open Discussion Among Bankers, Billers, and Vendors

WEDNESDAY

Keynote Address: Unlocking the Value of Your Customer Data
Malcolm Netburn, Chairman and CEO of CDS Global

Image Integrity—A Critical Component of Check Electronification
Kerry Atha, Director of Product Development, Viewpointe
Perry Bailey-Kopp, Group Vice President, Check Production Support, SunTrust Banks, Inc.

Distributed Capture Panel Discussion
Wally Vogel, President, Creditron
Mary Hockridge, Executive VP, NetDeposit
Brandon Kunz, Director of Product Strategy, Enterprise Payments Division, Goldleaf Financial Solutions
Charles W. Kelly Sr., formerly Senior VP, Huntington National Bank
Jon Reneslacis, Director, Product Management, VSoft

Top 20 Supermarket Hy-Vee Chooses NCR for Back Office Conversion (BOC)

Finally, public announcement of BOC roll outs...

The Midwest grocer Hy-Vee ($5.2 billion, 224 store locations) has selected NCR's ImageMark solution for Back Office Conversion (BOC). Checks will be scanned in the back office at each store and transmitted to corporate headquarters. From there items eligible for BOC are converted to an ACH and non-eligible items are processed as images.

Kevin Reeve, assistant vice president and controller at Hy-Vee Inc., said, “We wanted more control over our costs and a way to utilize our bank operations. We felt our best option was to bring the technology in-house and look for ways to leverage our investment. ACH alone will save us about 4 cents on every deposited check. NCR understood our strategy and offered a very competitive, end-to-end solution. Based on what we have seen so far, we anticipate significant cost savings when the rollout is complete.”

Hy-Vee owns a bank - Midwest Heritage Bank - so they are likely to grant themselves immediate funds availability. Very convenient.

Press Release

A Slow Start for Back Office Conversion (BOC)

The latest Digital Transactions explores why adoption of Back Office Conversion (BOC) has been so meagre six months after NACHA launched the transaction type for converting checks to ACH transactions in the back office of merchants instead of at the point-of-sale (via the POP transaction type). The primary cause of the slow start is the lack of information from ongoing merchant pilots. A few early adopters (as yet unnamed by processors due to non-disclosure agreements) continue to test the technology. But until their results are made public and other merchants can benchmark potential efficiencies, the new payment option will stagnate.

BOC's Slow Break from the Gate *
by Peter Lucas
Digital Transactions
September 2007

* Note: link is to PDF version of entire Sept 2007 issue; the BOC article starts on pg 18 of the PDF document.

BOC - Opportunity for Outsourcers to Handle Retail Checks

An article posted today at Digital Transaction News cites the relative quiet surrounding Back Office Conversion (BOC) since it's introduction March 16th (as we observed here at ForteBlog after Payments 2007 in Chicago last month).

Digital Transaction News suggests that the relatively high cost of scanners and software for large merchants with many outlets creates an opportunity for banks and processors to offer BOC as a outsourced solution and highlights a solution currently being tested by Plymouth, Minn based Solutran Inc called SPIN.

Read more:

How BOC’s Costs Create Opportunities for Check Processors
Digital Transaction News
May 8, 2007

Learn more about Back Office Conversion:

Read Forte Financial's recent article on Back Office Conversion
Visit the official NACHA website: electronicpayments.org

Consumer Concern: BOC vs POP

This letter to the Wichita Eagle, in Kansas (a follow up to their article on BOC here) demonstrates how at least one consumer views POP as more secure than BOC. The consumer's rationale is that if the paper check is returned to them the merchant isn't responsible for safeguarding their personal data:

Letter to the Editor, Wichita Eagle: 

Scary bank rule

Regarding "New rule offers 2nd option to electronically convert checks" (May 2 Business & Money): Right now, when huge Wal-Mart or tiny Bionic Burger electronically converts my paper check to an electronic debit, I am given the paper check back. I am responsible for that piece of paper, which has personal information on it.     

When a bank handles my paper check, it is responsible for my personal information.     

When a business uses a "Back Office Conversion," who is responsible for my personal information -- including a perfect example of my signature? Some business, without my knowledge or consent, now has a valuable piece of paper, which it must dispose of safely. With all the problems involved in identity theft or check fraud, how does a business protect its customers' information? The name and address of my bank, my checking account number, the routing number, and my signature may all be used without my knowledge to empty my account or disrupt my credit. Will the businesses using the Back Office Conversion system let their customers know what they are doing?   
JAMES KEENER
Wichita

One wonders how this consumer feels when they write a check that is NOT converted.

 

Back Office Conversion: Opportunity for Merchants and Retailers

Check conversion via Back Office Conversion (BOC) has significant advantages, particularly over the Point of Purchase (POP) check conversion method, and is widely regarded as NACHAs reaction the merchant disappointment with POP transactions.

Back Office Conversion benefits for merchants and retailers are as follows:

Increased efficiency: Rather than converting checks one at a time at the point-of-sale retailers can scan batches of checks at regular intervals throughout the day or at the end of day. This streamlined deposit preparation vs. traditional paper processing. Avoid courier pick ups or visits to the local bank branch.

Less hardware: Because BOC deposits are scanned at the end of the day, store locations only need one scanner instead of multiple scanners in order to equip each cashier station.

Less training: With POP all cashiers needed training on the transaction process and check eligibility. With BOC a small number of employees need training.

Faster funds availability: Merchants that submit their back office conversion files directly to a bank (rather than via a third party provider) will benefit from faster funds availability compared to making a physical deposit at a local branch. In addition, the Sunday evening ACH clearing window will be a benefit for those retailers and merchants that receive a large number of checks over the weekend. They will now enjoy funds availability on Monday morning.

Optimized routing: Some banks will offer services that convert your entire deposit to electronic transactions, either via ACH or image clearing/IRD depending on the eligibility of individual items.

Reduced risk: BOC transactions are processed via the ACH network and settle the following day. Merchants and retailers will be notified of returned items the next day; returned item notification for paper checks can take several days. As ACH transactions the items are eligible for re-presentment, thereby increasing the odds that a transaction will be successful.

Opportunity to consolidate banking relationships: Back office conversion enables merchants to make deposits regardless of the distance between their store location and the closest bank branch. Merchants and retailers with limited cash deposits are more likely to achieve consolidation than those that continue to have cash processing needs.

Learn more about BOC.

Available today: Back Office Conversion (BOC) simplifies check processing for merchants

Effective today, March 16, 2007, there is a new way to convert checks to electronic ACH transactions: Back Office Conversion (BOC).

This method joins Point of Purchase (POP)  and Accounts Receivable Entry (ARC) and fills a gap in check conversion options, particularly for retailers and other businesses that continue to receive a large number of check payments.

As check volume decreases checks are becoming increasingly expensive to process – for both merchants and financial institutions. Check conversion allows merchants and financial institutions to enjoy the efficiencies of electronic payment even as consumers continue to write checks.

BOC Addresses Shortcomings of Existing Check Conversion Options

Although ARC has been wildly popular it is limited to checks received via the mail or via a drop box. POP transactions at the Point of Sale have been much less popular because consumers are confused when they receive their check back at the checkout counter and merchants balked at the cost of having to equip all of their registers with scanners and train cashiers (see graph summarizing the three conversion transaction types).

BOC significantly improves efficiency by allowing batch processing of checks in the “back office” and eliminates the requirement for the customer to sign an authorization and the need  to return a voided check to the consumer. Under the new BOC rules, the merchant must post a notice that checks may be converted and allow customers to opt out. Merchants may require that customers who opt out of check conversion pay with a credit or debit card.

Initial consumer frustration with regard to no longer receiving checks in their statements has been mitigated as the volume of ARC grows and Check 21 image processing becomes more prevalent. Those consumers that persist in writing checks have realized that the processing environment has changed– they may not like it but they’ve realized times are changing.

    Adapted from NACHA educational materials

The rule change allowing BOC follows a rule change effective September 15, 2006 clarifying eligibility for check conversion. Up until that point business checks were excluded from conversion but there were no rules for identifying ineligible checks. The eligibility rules established last year for POP and ARC also apply to BOC. Checks are eligible for conversion as long as they are less than $25,000 and do not have an auxiliary on-us field.

Success Anticipated

NACHA anticipates a volume of 3 billion payments annually by the fifth year of BOC, nearly 50% of checks written at the point of sale.

Banks and retailers have been working over the past few months in anticipation of today's deadline and it is widely expected that merchants will being processing as soon as possible - some will start today - and volume is expected to grow quickly. We'll be monitoring the impact of BOC and report back here.

Learn more at the NACHA website:

BOC Press Release
BOC Fact Sheet
Educational Material for Businesses and Financial Instiutions