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New checking technology confuses bank customers

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 your checkbook.

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 the system.

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.

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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 two days.

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.


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-- Posted: July 1, 2003
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See Also
How to choose a checking account
Banking costs climbing faster than inflation
Checking glossary
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