Back-Office Conversion To Get a Vote Soon, May Start in September

A new form of automated clearing house payment that merchants could use to convert checks into electronic funds transfers could become a reality by September. A proposal from NACHA for so-called back-office conversion, which would allow businesses to collect consumer checks from points of sale and convert them later on in a central office, drew 101 comment letters from banks, merchants, and other organizations when the rules-setting body for the ACH sent it out for comment earlier this year. Of these, 97 supported the proposal, albeit with dissents on some points, says a NACHA spokesman. The deadline for comment letters was Feb. 3. NACHA told Digital Transactions News last month that industry comments were generally running in favor of back-office conversion (Digital Transactions News, Feb. 24). “Not every comment letter agreed with every part of the proposal, so we're working through some issues,” says the spokesman in an e-mail to Digital Transactions News. Nonetheless, he says, NACHA intends to release the proposal to its members for a vote “in the near future.” The association, he says, will recommend a September effective date for the new type of payment. Merchants, many of whom are attracted to back-office conversion as a less costly means of turning checks into electronic transactions, are expected to welcome the new application should NACHA's members approve it. “We're optimistic they will,” says Jacki Snyder, director of electronic payments at Supervalu Inc., Eden Prairie, Minn. Supervalu operates seven regional and two national grocery chains, including Save-A-Lot and Cub Foods, and is acquiring Albertson's Inc., which includes the Jewel-Osco chain. NACHA's existing e-check application for the point-of-sale, POP, has been slow to catch on with retailers because it requires signed authorization from customers for each transaction, slowing down tender time. Most merchants also feel the need to scan checks for POP, a costly proposition for multiple checkouts. With back-office conversion, however, no signature would be required. Instead, notices posted at the cash register and on receipts that checks will be converted would be sufficient. Also, far fewer scanners would be necessary to process checks in central offices. In adopting the so-called notice-equals-authorization notion, NACHA's proposal is in line with a ruling on Regulation E, the rule that governs electronic payments, released by the Federal Reserve Board Dec. 30.