New checking technology confuses bank customers

At Chicago-headquartered Bank One, spokeswoman Calmetta Coleman says ARC payments show up under "other withdrawals," along with debit card transactions, service fees and transaction fees.

"It's not real obvious that it's a check," she says. "Starting in August it will be clear that it's a check withdrawal. When a check is missing there will be an asterisk saying the check didn't clear before the statement end date, was shown on a previous statement or it will say that some checks may have cleared as electronic withdrawals -- look under the 'other withdrawals' section."

While NACHA, the national electronic payments association, may recommend that financial institutions list certain information on their statements regarding ARC payments, Vic Esclamado of Bank of America's card services division says there shouldn't be a standard statement.

"NACHA could provide some guidelines, especially about how to capture and display the check number. But I don't think our bank would support a standard for statements. How we communicate with our customers should continue to at our discretion."

Gartner's Litan says companies may be learning how important it is to fully inform customers about the process, but she says it didn't start out that way.

"I've been to a lot of conferences involving bankers and billers talking about ARC and not once did anyone mention the consumer angle. I think they got caught up in the euphoria for cost reductions, improved returns (bounced checks) handling and increasing electronic payments. I don't think it was intentional, but for some reason people forgot to think it through."

NACHA spokesman Michael Herd says that situation is changing.

"The customer angle is receiving attention at the highest levels now. We're trying to get the word out about training customer service representatives on both the bank and the company side. We're making statement stuffers available that banks and companies can use. We're seeing a much improved process over a year ago."

Herd says he's confident consumers will become comfortable with their checks being converted.

"When checks process electronically, unlike with a paper check, you'll get the name of the biller on your statement. Previously, you'd see check #512 for $400. Now you'll see that you paid X amount of money to the phone company.

"Think about your credit card statement. It has the name of the merchant; you don't get copies of your sales receipts with your credit card statement. You have the name of the merchant right there and it serves the purpose. This process moves the checking statement in the direction of how credit card statements are done."

If you do need a copy of the check for some reason, you'd go to the biller instead of the bank because the biller is responsible for keeping an image of the check for two years. But if the biller has a bank doing the ARC processing, the bank would keep the image.

Are consumers being nudged or pushed into a paperless banking system? Every consumer's perspective is different. While ARC is only a partially paperless system, most banks and billers give customers the ability to opt out of having their checks converted.

Nevertheless, it's clear that the public's comfort level with electronic banking is rising.

NACHA says Americans will make online bill payments in 2003 totaling $200 billion, double last year's dollar total.

Automatic bill payment, which has nothing to do with the Internet, is growing by about 15 percent every year. NACHA says more than 3 billion consumer bills were paid that way in 2002.

ARC, which became available in March 2002, saw very limited growth that year. Herd says only one or two companies had fully implemented the process by the end of the year. Now, he says, at least a couple dozen banks are offering the service and an estimated 50 to 100 companies are in various stages of implementation.

And, conversely, the number of checks processed by the Federal Reserve has dropped for three years in a row.