Educating customers on back office conversion of cheques

Dawn Stroup Kirby

Journal of Payments Strategy & Systems, 2007, vol. 1, issue 4, 354-364

Abstract: Back office conversion (BOC) of cheques is a new, highly streamlined method that merchants can use to convert consumer cheques into automated clearing house (ACH) debits. Merchants simply need to post a notice that customer cheques will be converted and provide a copy of that notice on the receipt or a customer takeaway. The customer authorises conversion by writing the cheque. At end of day, the merchant processes the cheques in batch mode in a back office location, creating an image cash letter that is transmitted to its depository bank. The bank uses the captured cheque information to create ACH transactions directly debiting the customers’ cheque accounts. Because of the clear benefits of BOC to merchants, the National Automated Clearing House Association (NACHA) anticipates wide-scale adoption, with annual transaction volume projected to reach three billion payments within five years. Less clear is what the impact on consumers will be. Analysis of bank customer service call statistics indicates that many consumers do not understand cheque conversion. Calls about cheques converted to ACH debits are the fastest growing segment of all payment-related calls. Because BOC promises to accelerate this trend, educating consumers about cheque conversion will become an increasingly critical requirement for merchants and banks.

Keywords: Automated clearing house; back office conversion; cheque conversion; Check 21; consumer cheques; customer service; electronic payments; NACHA (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2007
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