A Processor Puts a Different Spin on Back-Office Conversion

Check processor Solutran Inc. thinks it has found a way to make the new back-office conversion (BOC) e-check code more attractive to merchants: take the costly scanning process out the back office and outsource it. Plymouth, Minn.-based Solutran recently announced its SPIN service, for Solutran POS and Imaging Network. The privately held company is aiming SPIN squarely at retailers reluctant to embrace BOC, a new automated clearing house code that NACHA?The Electronic Payments Association will turn on next March 16. Herndon, Va.-based NACHA is the ACH's rules-setting body. BOC is the latest attempt by NACHA to make ACH payments attractive to retailers at the point of sale by reducing the number of paper checks moving through the banking system. Retailers generally regard the current POS e-check code, called POP, for point of purchase, as cumbersome. Merchants need to get explicit customer approval for electronic conversion, scan the customer's check to capture the routing and account information on the magnetic ink character recognition (MICR) line, and return the voided check to the customer. Hence, merchants using POP generally have a scanner in every lane. BOC's supporters see the new code as overcoming POP's shortcomings because merchants will be allowed to scan checks in their back offices, reducing the need for equipment; signs at the checkout counter rather than affirmative approval with each check will suffice for notification; and fewer employees will need training about e-checks. But the seemingly lesser requirements for equipment and training still aren't enough to persuade many merchants, particularly larger ones, that BOC would be worthwhile, according to Solutran's president and chief executive, Barry J. Nordstrand. “Number one, it would cost them a lot of money on capital expenditure on a not-growing payment type,” he says, referring to paper checks. Retailers adopting BOC would still have to learn a new technology and train some workers, and they would have the expense and hassle of destroying the paper checks they scan, he adds. SPIN would work like this: Retailers would accept paper checks just as they normally do. The scanners they use for check verification would be configured to capture the check's amount and MICR information and store it until the end of the day, when it would be electronically routed to Solutran. Using its decisioning technology, Solutran would route the transactions for least-cost processing. In most cases, Solutran expects transactions to qualify as BOC items. In the meantime, Solutran's logistics and courier business partners would pick up checks daily and transport them to Solutran's four processing centers throughout the country. ACH-ineligible transactions would be matched with corresponding MICR data and imaged for clearing through image-exchange networks. Solutran also would handle the digital archiving of images and the destruction of paper checks. But by using SPIN, retailers with a very high percentage of ACH-eligible consumer checks, such as grocery stores, might have up to 95% of their deposit available the next day, according to Nordstrand. “Outsourced back-office conversion is how we've been dubbing it,” he says. Retailers would pay for SPIN on a per-item basis. Nordstrand claims that compared with the costs of depositing paper checks, they could save up to 70% on bank fees. Solutran's core customer base is the nation's top 200 retailers. Nordstrand says 10 of the top 100 are interested in SPIN, and an undisclosed number of them have signed contracts. SPIN will go live when BOC does in March. “We're trying to reduce the expense of processing checks, the caveat is you have to do it with minimal impact to store operations,” says Nordstrand.