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COPYRIGHT 2004 National Association of Credit Management
Introduction
A short while ago, the industry seemed to buzz with predictions of prodigious growth of check conversion. Yet, a significant number of retailers and billers alike have examined the business case for check conversion and found it lacking. With Check 21's passage, a new debate rages as to the superiority of two competing check electronification options--check conversion versus check truncation. These debates often overlook two fundamental realities:
* Payment systems can co-exist and have co-existed efficiently. Such systems are dynamic, gaining/losing traction over time. Thus, we should not necessarily object to the notion of coexistence between check conversion and check truncation.
* Payment choices should be made based on an overall process perspective--not merely the attributes of individual payments. While float and per-item transaction costs are important, other implications such as implementation and operational costs should, but often do not, play a role in the ongoing debates.
This article supports coexistence of check conversion and check truncation in the context of a unified payments model in which the "all or nothing" electronification of the past is replaced by intelligent endpoint routing of individual payments, administered centrally, to achieve optimum efficiency for each individual transaction.
The "All or Nothing" Approach of the Past
Up until now, check conversion decisions could only be made on an "all or nothing" basis. Conversion decisions made were not based on individual payments, but a collection of individual payments which, in aggregate, were deemed better off converted to an alternative payment method (e.g., ACH). In many cases, this approach provided a favorable business case even though check conversion may not provide the optimum routing for clearing and settlement of many of the items in that group of payments. For example, a biller processing large volume remittances may indeed benefit from check conversion even though traditional clearing of local paper checks presents a more favorable disposition of high value items through same-day funds availability, versus the next-day availability afforded converted items.
Intelligent Endpoint Routing
Item Attributes
*** Point of Presentment
*** Time of Capture
*** Routing & Transit Number
*** Dollar Amount
*** Image Quality & Usability
Other Criteria
*** Float Tables
*** Cost to Clear
*** Exchange Agreements
*** Conversion Eligibility
*** Check Conversion Opt-out
*** Traditional Paper Cash Letter
*** ECP w/Paper to Follow
*** ECP w/Image to Follow
*** ECP with Image on Demand
*** X.937 Electronic...
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