Some Not Ready for e-Checking

Initially set up to help banks process checks faster and reduce the amount of paper, many businesses are realizing the cost savings produced by eliminating the handling and processing of paper checks by converting them to an electronic format.

Electronic check conversion allows retailers and others to transform regular paper checks into electronic checks. The numbers on the bottom of each check are picked up by a scanning device and processed in much the same manner as a credit card.

Once the check is processed, the customer is asked to sign a receipt and is given a copy for their records. After the check has been processed, it is returned to the customer and voided or marked by the merchant. The merchant presents the processed check information to the customer’s bank or other financial institution electronically, and the funds are transferred into the merchant’s account.

“Electronically converted check purchases will show up on your statement as an electronic debit. The statement is legal proof you paid the bill and will show the amount and store name where the purchase was made,” said Allan Mabry, compliance officer for Claremore-based RCB Bank.

Under electronic check conversion, a check is used simply to obtain information — such as the bank routing number and check number — to process a purchase or payment. That information is used to make an electronic withdrawal from your account using the Automated Clearing House network, he said.

Many companies are adopting electronic check conversion because it speeds up payment and reduces processing costs.

“Most people are familiar with ACH’s network because they set up automatic debits for expenses like insurance and house payments,” Mabry said, noting electronic checking, or an e-check, uses the same system.

While the system has numerous benefits, many customers still have concerns, he said. Mabry said he feels that is mainly because customers have been conditioned to receive the images of their items back when they get their statements.

While fewer checks are being written in the U.S., according to the Federal Reserve Board, the number is still very large. Among the reasons Americans like paper checks: They’re familiar and reliable.

“Consumers generally understand how cash, credit cards and checks work because they can visually see the process and have control,” Mabry said.

Some people also want to have “something tangible to show proof of purchase,” Mabry added.

But electronic payments are growing dramatically as more consumers conclude that transacting business electronically is cheaper, easier and faster than writing and mailing paper checks.


Converting checks to an electronic format allows businesses to realize the cost savings produced by eliminating the handling and processing of paper checks. Since a business is no longer required to physically deposit checks at a bank branch, many retailers are using check conversion to simplify cash management and consolidate bank accounts.

Check conversion reduces fraud risk as checks are electronically verified against a database of closed accounts or accounts with bad-risk histories at the time the transaction takes place.

Electronic checking also reduces handling and deposit costs and eliminates bank fees associated with returned checks.

Because of the numerous benefits and bottom line cost savings, many stores like Wal-Mart and the Gap, are using electronic check conversion. ?

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