The Last Paper Check

March 16 felt like any other day in the back offices of retailers and other businesses with sizable volumes of small checks, but on that day the lowly check marched one step closer to extinction. Oh sure, bankers have been predicting the end for years. But this time, with the new NACHA (National Automated Clearinghouse Association) rule that allows back-office conversion of expensive, troublesome paper checks into cheap, predictable ACH debits taking effect, payment professionals promise that this is really the beginning of the end. The BOC (back-office conversion) program rounds out a NACHA check conversion menu that already includes POP (point of purchase) and ARC (accounts receivable conversion). POP has been used for years, with modest success, to make the conversion at the cash register where the clerk passes a blank check through a scanner and hands it back to the payer. POP now accounts for 280 million transactions a year. ARC has been used for fewer years with greater success (2.2 billion transactions annually) to convert checks that arrive by mail at lockbox operations. POP, ARC and now BOC are intended for consumer checks, but can be used to convert any check that is under $25,000, not a third-party check and does not contain an extra segment in the MICR line.

Retailers won’t talk yet about their BOC strategy, but companies are looking closely at the business case for launching pilots, reports Keith Theisen, senior vice president and head of product management in the treasury services operation of Wells Fargo Bank. “We have a business case tool that shows them the impact on transaction costs, float and returned check notification,” he says. “They’re very interested in running models and making decisions based on what they see.” A few have already decided to embrace BOC and are training staff and equipping back offices or pilot testing with their banks, he reports.