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Imagine a small-business owner toiling over a stack of checks in a tiny back office. Pen in hand, the overworked entrepreneur laboriously scratches the information from each check onto a deposit slip. Eventually, the paperwork finished, he puts the lock on the door, trudges to the bank and stands in line to make his deposit.

But none of that has to happen. With “remote-deposit” services, merchants scan checks to create electronic images they can transport to the bank at the click of a button. And merchants save so much time and effort, they can develop newfound trust and admiration for the ISO that sold the service, according to one particular ISO.

“You become their new best friend,” Tim Rogers, director of strategic development at TermNet Merchant Services Inc., says of remote deposit. The service, one of several value-added products the Atlanta-based ISO offers, travels over the automated clearinghouse network.

TermNet and other ISOs and acquirers say they are boosting revenue, polishing their images and retaining customers by selling merchants ACH-related. 

Some of the services have been around for some time, while others are just emerging. The old guard includes remote deposit, says Don Singer, a senior vice president at EZCheck, a Houston-based ACH processor. The really old guard includes, for example, check guarantee, a service that ensures merchants will not have to deal with bounced checks. It became available 40 years ago, Singer says.

Newer services that travel over the ACH rails include “checks by phone” and “checks by Internet.” Both are in their infancy but are attracting increasing attention, according to Nancy Atkinson, a senior analyst for wholesale banking at Boston-based Aite Group LLC.

Check Not Present

Among the latest ACH services include check payments by phone and online.

Checks by phone mirrors making a credit card payment over the phone, says Chris Brundage, chief operating officer of Global eTelecom Inc., a Fort Walton Beach, Fla.-based ACH processor.

A caller gives a merchant the usual information about the purchase, such as the product name and price, and reads aloud the checking account and routing numbers printed on the bottom of a personal check, he says.

A store employee enters the data into the retailer’s system for transfer to a processor or into a terminal dedicated to the processor. After the merchant receives the authorization for the transaction, the processor debits the consumer’s account and funds the merchant. The transaction then appears on the purchaser’s checking account statement. 

“That all happens over the phone,” Brundage says.

With online check payments, consumers type in the check information at checkout on the merchant’s website instead of reciting it over the phone. Otherwise the transaction parallels checking by phone, Brundage says.

Both services are growing quickly as consumers become more comfortable with them. When consumers ask for the services, merchants tend to begin offering them, according to Atkinson.

Indeed, EZCheck Internet check-payment volume has soared 45% annually over the past three years, and check payment by phone has expanded 25% annually during the same period, says Singer.

Mobile ACH payments also are increasing in volume, observers agree. However, supportive data are scarce because
NACHA lumps mobile transactions with Internet transactions, says George Throckmorton, managing director, advanced payment solutions, at the Herndon, Va.-based group. NACHA oversees the U.S. ACH system.

“We had an existing debit transaction that was originally built for the Internet,” says Throckmorton. “It seemed like a logical conclusion just to move that forward for mobile, so for the time being that is what we’re doing.”

Ride The Wave

Whatever designation NACHA eventually assigns to mobile ACH, the technology is attracting users, says Brundage. Processor Global eTelecom Inc., for example, is accepting ACH payments through some mobile credit card terminals, says Brundage. The merchant can key in the check information or capture an image of the check for processing, he says.

ISOs could sell the mobile service to merchants that accept checks in remote locations, including pizza-delivery services, exterminators, plumbers, flea-market entrepreneurs or business-to-business delivery trucks, Brundage suggests.

Despite those potential markets for mobile ACH, the technology is spreading slowly, Brundage says. “The volume of merchant applications is not there yet; it’s a newer technology,” he says. “It’s riding this general wave in the industry where everything is geared toward mobile. It seems to be the hot thing out there. Yet the adoption rate is not as great as folks hoped.”

Sales could increase as ISOs become more comfortable with the technology, Brundage says. Merchants appreciate the ability to process a check “then and there” instead of waiting for a sales or delivery person to return to the office a paper check, he notes.

Merchants want mobile to leverage the same point-of-sale structure they use, says Throckmorton. “They’re trying to make sure that the business case is going to be sound–where they’ve got to get additional transactions (and) additional customers,” he says.

Besides accepting payments on mobile devices, merchants want to accommodate customers who are eager to use their mobile devices to make payments, Throckmorton says.

Consumers who use mobile payments may get access to more product and transaction information than they could previously, Throckmorton says. Merchants also may use the technology to send shoppers promotional messages and electronic coupons, he says.

Look for a longer version of this article in the November/December issue of ISO&Agent magazine arriving shortly.

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