Point of Sales Check Conversion

Electronic Check Conversion is the process of converting a paper check into an electronic funds transfer transaction. The process involves scanning a check through a MICR reader to capture the MICR account information and consumer demographics.  Once authorized, daily settlement of funds occurs by use of the ACH (Automated Clearing House) electronic funds transfer system. Upon approval of the check transaction, the customer is presented with an EFT (Electronic Funds Transfer) authorization receipt, which is then signed to allow a debit to the customer's account and a credit to the merchant's account. Once the customer has signed the authorization receipt, the check is no longer a negotiable instrument, it is stamped "VOID - THIS CHECK WILL BE CONVERTED TO AN ELECTRONIC FUNDS TRANSFER", and returned to the customer thus eliminating the need to take the paper check transaction physically to the bank for deposit.

Merchant Benefits

  • Retailer that accept personal checks as payment for goods or services can scan checks at the point of sale to decrease the time it takes to prepare bank deposits.
  • Electronic Check Conversion transactions can be optionally guaranteed for an additional fee so the merchant will be paid regardless of the availability of funds for the transaction.
  • The process of converting checks to paperless ACH transactions reduces bank fees and any returns on ACH transactions will be represented electronically. Reducing the number of paper checks and/or re-presentments of checks will reduce the deposit and transaction fees a merchant may be paying their bank.
  • Removing checks from the paper process also reduces the preparation and balancing time needed to prepare deposits. There will be fewer paper checks to deposit each day, therefore, this will save time and expense for employees.
  • Banks typically post non-paper transactions prior to paper checks; therefore, electronically converted checks will usually clear before paper deposited checks.
  • Converted checks can be consolidated into one bank account from multiple store locations.
  • The availablity of funds is improved by the ability to electronically represent unpaid items to enhanced collections.  In addition, returned check fees can be debited directly from the consumer's account.
  • Returns on electronically converted items are received much faster than returns for paper checks. Therefore, negative files are updated much faster reducing fraud.
  • Funds from converted transactions are posted to the merchant's account usually within 48 hours of the transaction.

Merchant Limitations

  • Conversion Exceptions - Not all checks can be converted electronically, thus the merchant will still be required to manually deposit paper checks that could not be converted. Conversion exceptions will be a small percentage of checks depending on industry. Current exceptions are:  Government checks, Cashier's checks, Money Orders, Site Drafts, 3rd Party checks, Traveler's checks, Payroll checks, Counter checks, Corporate/Business checks, Credit Card Convenience checks
  • Administrative Returns - These will occur on MICR misreads, some special accounts, and transactions on non-participating banks and credit unions and result in the inability to clear the transaction. Some may result in collection accounts or be manually corrected and resubmitted.
  • Transaction Dollar Limit - NACHA does not impose a dollar limit on the amount of the check, but our risk management services do set dollar limits.
  • Retention of Authorization Slips - NACHA regulations require the merchant to retain the original, signed authorization slip for a minimum of 2 years.
  • Consumer Declination of Conversion - A consumer may decline authorization of the check conversion process.