Effective today, March 16, 2007, there is a new way to convert checks to electronic ACH transactions: Back Office Conversion (BOC).

This method joins Point of Purchase (POP)  and Accounts Receivable Entry (ARC) and fills a gap in check conversion options, particularly for retailers and other businesses that continue to receive a large number of check payments.

As check volume decreases checks are becoming increasingly expensive to process – for both merchants and financial institutions. Check conversion allows merchants and financial institutions to enjoy the efficiencies of electronic payment even as consumers continue to write checks.

BOC Addresses Shortcomings of Existing Check Conversion Options

Although ARC has been wildly popular it is limited to checks received via the mail or via a drop box. POP transactions at the Point of Sale have been much less popular because consumers are confused when they receive their check back at the checkout counter and merchants balked at the cost of having to equip all of their registers with scanners and train cashiers (see graph summarizing the three conversion transaction types).

BOC significantly improves efficiency by allowing batch processing of checks in the “back office” and eliminates the requirement for the customer to sign an authorization and the need  to return a voided check to the consumer. Under the new BOC rules, the merchant must post a notice that checks may be converted and allow customers to opt out. Merchants may require that customers who opt out of check conversion pay with a credit or debit card.

Initial consumer frustration with regard to no longer receiving checks in their statements has been mitigated as the volume of ARC grows and Check 21 image processing becomes more prevalent. Those consumers that persist in writing checks have realized that the processing environment has changed– they may not like it but they’ve realized times are changing.

    Adapted from NACHA educational materials

The rule change allowing BOC follows a rule change effective September 15, 2006 clarifying eligibility for check conversion. Up until that point business checks were excluded from conversion but there were no rules for identifying ineligible checks. The eligibility rules established last year for POP and ARC also apply to BOC. Checks are eligible for conversion as long as they are less than $25,000 and do not have an auxiliary on-us field.

Success Anticipated

NACHA anticipates a volume of 3 billion payments annually by the fifth
year of BOC, nearly 50% of checks written at the point of sale.

Banks and retailers have been working over the past few months in anticipation of today's deadline and it is widely expected that merchants will being processing as soon as possible – some will start today – and volume is expected to grow quickly. We'll be monitoring the impact of BOC and report back here.

Learn more at the NACHA website:

BOC Press Release
BOC Fact Sheet
Educational Material for Businesses and Financial Instiutions