Don't Neglect The Humble Check

 by: Jason Schwartz

Internet commerce is an instantaneous purchase medium. A customer sees the product he or she likes; enters credit or debit card details; the product gets shipped. Simple. No messing around with mailing out checks, no waiting for the merchant to cash the check.

For online merchants, too, the process is straightfoward and convenient. There's no waiting for a check to arrive; no worrying about whether the check is good and no delays in shipping the product.

Consequently, it is easy for online merchants to assume that there is no value in offering check payments as a purchase option. Indeed, in competitive industries where margins are tight, the sheer time cost and risk involved in accepting checks makes it an unprofitable choice. And, anyway, everyone uses credit or debit cards these days. Right ? Wrong.

Here's some facts for all you ecommerce entrepreneurs to consider:

The 2004 Federal Reserve Payments Study ( http://www.frbservices.org/Retail/pdf/2004PaymentResearchReport.pdf ) shows that checks are still the most popular non-cash payment method, with a total dollar volume over 20 times that of credit and debit cards added together. Further, a recent publication by the Minnesota Attorney General's office indicates that 11% of Americans have no credit card at all. That figure doesn't even include the millions more people who are maxed out on their cards.

Can you REALLY afford to neglect the 30 million plus Americans that don't have credit cards and the millions more that prefer to use checks over any other form of payment ? After all, these are your potential customers too !

ACCEPTING CHECKS ONLINE

Even being aware of the huge numbers of new potential customers, accepting check payments can still appear problematic to ecommerce based merchants. The possibility of bad checks, the delay in receiving payments, the additional paperwork - all these things increase costs and reduce profits. However, the recent Check 21 legislation and the increased availability of electronic check solutions to businesses of all sizes means that ecommerce merchants can now accept check payments online, by phone and fax easily and virtually risk free.

HOW ELECTRONIC CHECK PROCESSING WORKS

Accepting electronic check payments is a simple process. The merchant simply transmits the customers' check information to a transaction processing company. The processor then moves that information from the customer's bank account and that of the merchant. It's easy, convenient and, most importantly, means that the clearing process is much faster than traditional paper check transactions. Best of all, there is no delay in receiving payment, it's inexpensive and will increase your clicks to sales ratio dramatically.

CHOOSING A CHECK TRANSACTION PROCESSOR

There are a number of transaction processors who will compete aggressively for your business. Many of them offer easy integration into your current shopping cart or a standalone solution. One click export to your current accounts software is also a standard feature. The main points online merchants should consider when selecting a company to handle check payments are as follows:

1. No Application Fee - Some payment processors charge a fee just to apply to use their services. For obvious reasons, these are best avoided.

2. No Monthly Minimums - Smaller ecommerce companies should be looking for check payment processors that do not have a set monthly minimum number of transactions.

3. Flat Fees or Percentage of Check Value - Some payment processing companies charge a percentage of the value of each check processed, while others offer a flat fee per check. While the flat fee option makes it easier to predict costs and is the best choice for many, it is worth doing the math to decide whether this is the best route for your company.

4. Check Verification - In order to reduce the risk of bad checks, real time check verification is a must have service. The best of these is the SpeedChex ATMVerify system, which has access to over 170 million accounts. This allows users to determine whether an account is currently overdrawn, frozen or closed thus determining whether a check is likely to be returned.

Offering electronic check payments as a purchase option is the only effective way that online merchants can tap into the consumers preferred payment option and still reduce risk, receive funds fast and ship goods quickly. So, don't neglect the humble check.