New checking technology confuses bank
You shun online bill
payment. You've heard about bills that don't get paid, or worse,
companies that keep getting paid even though you canceled the service.
You'd rather write checks, mail them and, a month or so later, have
them show up with your bank statement ready to be reconciled with
Sorry, but that option is rapidly disappearing as
banks, credit card companies, utilities and retail companies sign
up for something called accounts receivable conversion, or ARC.
ARC is a means of converting a paper check to an automated
clearinghouse payment. Let's say you write a check to pay for a
purchase at Wal-Mart. The cashier scans the check electronically
and hands back your check. The data from your check moves through
ARC enables your credit card company or utility to
do the same thing. They truncate -- that is, electronically
capture the information from your check, make an image of it --
which stays on file in case you request it -- and then destroy the
check. From then on, only an electronic version of your check winds
through the system.
While it stops the expensive, circuitous routing of
paper checks, it also means your bank doesn't have a paper check
to enclose in your statement. That's a potential sticking point
for some customers.
Another problem for consumers who risk overdrawing
their account is float. The amount of time between when you write
a check and when the money is actually deducted from your account
is reduced. Instead of a check taking, perhaps, five or six days
to clear your account, an ARC payment could be cleared in one or
An issue of more concern to the industry is that many
customers have a difficult time finding where the check payment
is listed on their statement.
Companies that ran ARC pilot programs often found
that consumers didn't know why they weren't getting back their checks
and, even if they didn't expect to receive the paper check, they
couldn't find the payment on the statement.
"There's no uniform method of reporting on the
statement," says Avivah Litan, a research director at Gartner,
a research company based in Stamford, Conn.
"They need to educate the consumer. They need
to have good descriptive information in the message. Capture the
check image and show the customer -- this is what we captured and
this is how the payment was made. They won't do that because it
would eat up the savings."
Richard Oliver, retail payments manager for the Federal
Reserve System, says banks are trying to decide where to list ARC
payments on their statements.
"Does it show up in ATM with electronic transactions,
or is it better if you integrate it with the checks? The customer
sees checks 205 and 207 and wonders what happened to 206."
Wells Fargo ran two pilot programs over the past couple
years involving hundreds of thousands of its credit card customers.
The second went much smoother than the first.
"We learned it's extremely important to have
a really clear, timely disclosure for the customer, an insert that
they get for a couple of months in advance," says Keith Theisen,
senior vice president of treasury management.
"The first one we sent out was on the back of
a bill. It couldn't really do what was needed to spell it out very
clearly. The second time, we told them where (the check payment)
would appear -- in debit transactions/ATM withdrawals. We gave them
an example of how it might look, and that was helpful. After they
get used to it, the statement gives a clearer description than a
check on a statement."
Theisen says complaints and customer confusion, which
were high during the first test, were considerably reduced during
the second test. Wells Fargo credit card services is going to use
ARC with all its credit card bills, and the bank's mortgage division
is doing an ARC pilot.