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RETURNS PROCESSING
Electronic check processing will speed transactions, cut costs and fight fraud.
As Check 21 is set to take effect this year, banks are readying their returns processing for an increasingly electronic age. Aiming to make the payments system more electronic, and thus faster, Check 21 goes into effect in October and will allow banks to use a substitute check to process transactions electronically in areas such as returned checks.
Check 21 will impact banks' returned-check processing so that "substitute checks can be used to process a returned-check item, so they do not have to convert it to an ACH debit," says Stessa Cohen, a New York-based financial services and retail banking analyst at research and consulting firm Gartner (Stamford, Conn.). Banks will have the option to convert the return check to ACH debit or process the return using a paper check or substitute check, she adds.
Moving images of returned checks electronically means "dramatic" savings for banks, Cohen says, though she declines to speculate on how much. Banks already...