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Check imaging is key to ECC success: integrated imaging technology cuts bad check costs and losses--and can make the difference between a successful or failed ECC project.

Retailers struggle to provide payment options to their customers amidst rising payment costs. Surprisingly, checks still represent 33% of supermarket transactions, each one incurring between 40 and 50 cents in handling fees. Electronic check conversion, or ECC, eliminates the cumbersome steps required to manually process paper checks, cutting labor costs and processing time by 50% or more.

ECC versus the paper process

Paper checks are collected, sent to the bank, then sent to central processor for manual encoding and imaging, then forwarded to the Federal Reserve where a credit is finally processed. With manual processing, it can take up to five days before the retailer can get paid on the check. With ECC, the customer's blank check is inserted into a POS printer that electronically transmits data to the store's check file. The voided check is handed back to the customer with a receipt, and the check cashing process continues as usual. ECC cuts the paper trail between the store and the bank and shortens the retailer's float time to one or two days, so that funds--and interest on those funds--is available much sooner.

The true value of the image

Because ECC relies on MICR encoding (reading the magnetic characters at the bottom of the paper check), retailers face high risk once the check is gone. If the reader can't process the MICR line and the check is bad, grocers are left with nothing but a string of numbers and a likely loss due to fraud. With digital imaging, the image is digitally scanned at the point-of-sale then transferred to the file and archived. So if a check is returned, grocers have complete customer account and address information to immediately resubmit or pursue legal collection of the check. Since 80% of all electronic check returns require an image for full recovery, check imaging brings a proven risk-reduction mechanism to the ECC process that can be measured both in the reduced number of bad checks and reduced losses due to fraud.

Solving the returned check problem

While electronic check conversion (ECC) dramatically lowers check handling costs, it does nothing to aid the recovery of returned checks. Retailers lose an estimated $12 billion annually by failing to collect bad checks, often taking this loss as a direct write-off to the bottom line. As retailers debate on whether check imaging is necessary, they need to be armed with the facts: What percentage of your total dollar sales do check payments represent? What percentage of your checks are uncollectible? And what are your annual costs and losses due to bad checks?

The case for digital check imaging is compelling and the results are irrefutable. Epson customers have proven a return on investment of well under a year, a far faster return than on ECC alone. And ECC with imaging makes check payments second only to cash in cost effectiveness. With these savings, retailers won't grapple with the cost of imaging once they understand the real price they pay for not having it.

Benefits of ECC with Digital Check Imaging

* Reads MICR and captures check image in a single step

* Speeds handling of returned checks

* Increases recovery of bad checks

* Provides complete check data in case MICR is misread

* Helps drive marketing and loyalty programs

Bud Weist is Vice President of sales and marketing for Epson America's System Device Group, of Long Beach, California.

* Source: "It All Adds Up: An Activity-Based Cost Study of Retail Payments," sponsored by the Food Marketing Institute.
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Title Annotation:Electronic check conversion
Comment:Check imaging is key to ECC success: integrated imaging technology cuts bad check costs and losses--and can make the difference between a successful or failed ECC project.(Electronic check conversion)
Author:Weist, Bud
Publication:Progressive Grocer
Geographic Code:1USA
Date:Feb 1, 2006
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