Those of us in the payments industry may often think “electronic is better,” but there are still those who prefer paper. Specifically: checks. 91 percent of U.S. consumers use checks, which is more than any other form of payment?1 In fact, the average U.S. consumer writes over five checks per month for retail payments, and 22 percent of total U.S. non-cash payments were made by check in 2010.2
However, checks often shift risk and hassle onto merchants who have to transport them to the bank, deal with bounced checks and worry about fraud.
Luckily, new advances in check acceptance technology make it safer and easier than ever before to include checks as a customer payment choice. These technologies provide merchants with more secure and convenient options when deciding whether and how to accept checks.
Electronic Check Acceptance: How does it work?
Step 1: Capture Bank Information with a Check Reader
Accepting checks electronically can be relatively easy for most merchants. When a check is presented as payment, the in-store experience resembles that of a credit card transaction. However, instead of a card swipe, a check “read” takes place which captures bank account information. The necessary hardware is minimal—typically a check reader that connects to a standard payment terminal. Merchants can also choose a terminal with an integrated check reader that offers advantages related to ease of use, space efficiency, and enhanced reporting capabilities.
Step 2: Service Providers Screen the Bank Information
When checks are converted into electronic transactions, service providers can quickly evaluate the risk in accepting the check. Checks get screened against data from hundreds of thousands of businesses and financial institutions. Then, the merchant receives an authorization or recommendation as to whether or not to accept the check.
The process takes just a few moments—about as long as a credit card authorization.
Benefits to Merchants
Electronic check acceptance can have a number of benefits for merchants: fewer bounced checks and bank charges, fewer lost checks and fewer trips to the bank with electronic batch closing, reduced fraud risk, and faster funding. Also, with some offerings, your provider will guarantee funding on approved transactions—which means you can completely eliminate most of your risk. And with many systems, you return the check to your customers, helping to protect their personal information.
There are many factors to consider when deciding whether and how to accept checks from your customers. Having an understanding of your payment acceptance options certainly helps in the decision-making process. Keep electronic check acceptance in mind as one of the ways you may be able to positively impact your business.
1 2010 Federal Reserve Payments Study
2 2010 Survey of Consumer Payment Choice, Federal Reserve
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