Once Languishing, POP Now Gets a Warm Welcome from Merchants

A payment method that lets merchants convert checks at the cash register into electronic transactions shows signs of picking up momentum across a spectrum of retailers. It's quite a turnaround for the point-of-purchase electronic-check application (POP), which relies on the automated clearing house network for settlement. Only a few years ago, the application was stagnating as merchants shunned it. Now, volume is growing fast and merchants are starting to laud it for reducing bank fees, transaction costs, and check losses. Getting some of the credit for this turnaround, ironically, is another retailer?one that happens to be the largest in the world. Wal-Mart Stores Inc. was an early adopter of POP and rolled out the application to all its 3,400 stores last year. Speaking about POP this week at NACHA Payments, a trade show in Las Vegas, a panel of merchants said Wal-Mart's efforts had helped get customers comfortable with the peculiarities of the POP process, which includes receiving the check back from the cashier and signing off on a receipt to authorize the transaction. “Wal-Mart helped us out a lot,” said Mike Brown, general manager for retail technology at Unified Grocers, a Commerce, Calif.-based supplier to about 3,000 independent grocery stores in the Western U.S., about 100 of which are now live on POP. “Once it hit mass appeal in the Wal-Mart world, it got easier [for us to implement it].” Inter-bank transactions using the POP application grew 72% in 2007, to 462.7 million, as more merchants adopted the method. Mark Wallin, general manager for Houston-based TeleCheck Services Inc., a First Data Corp. unit that offers check-verification and ACH services to merchants, tells Digital Transactions News about three-quarters of the 2 million daily transactions the processor handles are now POP payments. The merchants represented on the panel are TeleCheck clients. Wallin says merchants are finding less and less substance in the early objections to POP many retailers voiced. While NACHA, the governing body for the ACH, does not require check images for POP, many merchants felt imagers would be necessary to record copies of checks, since the POP process requires cashiers to hand the documents back to customers, making it hard to defend against returns. That perception made POP seem prohibitively expensive for multilane stores. But Wallin says a “majority” of TeleCheck's new POP clients don't use imagers. “The percentage of transactions where we're not able to collect [transaction information] because of not having an image is very, very small,” he says. By contrast, he says, most have check readers already installed, and so have found the investment necessary to implement POP affordable. “POP didn't necessarily require any capital outlay as long as they had a check reader at the point of sale,” he notes. Another early objection was that the requirement to get customer sign-off on each transaction would slow down checkout lanes. But the merchant panel said they had not seen any appreciable change in tender time. “Our studies showed us [POP] at worst added one or two seconds” to average tender time, Frank Torrell, director of asset protection at Chesapeake, Va.-based Dollar Tree Stores Inc., told the audience. Dollar Tree has rolled out POP to all 3,400 of its discount-goods stores. The panel also debunked the notion that the POP process is confusing for cashiers. Several said they rely on signals and prompts sent to the cash register. “We do the thinking at the home office for them,” said Dan Cutright, senior manager for sales audit at Abercrombie & Fitch Co., the New Albany, Ohio-based specialty retailer, which adopted POP last fall. “We lead them through every transaction step. There's a register prompt. There's no guesswork. We're not relying on training in the store, and we're not relying on seasoned veterans [at the registers].” At the same time, the panel credited POP with savings in bank charges for check deposits and said the process, since it offers faster settlement and includes check verification, has chopped losses from bad checks. Torrell said Dollar Tree's check losses, which totaled $4 million annually before the chain implemented POP, came in at $250,000 last year. “{POP] has saved us a lot of money in bank fees,” said Julie Bravi, accounting manager for Valero Retail Holdings Inc., the San Antonio, Texas-based operator of gasoline stations and convenience stores. “And there's been a reduction in hot checks?we just don't take them any more.”