Report: Get Ready for a Sizzling Market for BOC Transactions

A new electronic check-conversion application set to go live in March at retail and other check-accepting businesses could become one of the fastest-growing products ever introduced for the automated clearing house (ACH) network, generating 425 million transactions in 2007, predicts a new study from Boston-based market researcher Celent LLC. The application, known as back-office conversion (BOC), will steadily grow in volume to 2.75 billion transactions by 2010 before usage levels off with adoption saturation and the ongoing erosion of overall check volume at the point of sale. “Celent expects significant BOC volume,” says the report, entitled “Check Electronification: Roads to Rome Revisited.” By 2010, BOC volume will account for almost one-third of total check-conversion traffic, the report projects. At the same time, the application will present a major opportunity to turn paper transactions into electronic ones. Paper checks at the point-of-sale amount to some 6.2 billion items yearly, according to a Federal Reserve study cited by the report. The report says that while paper checks represent 10% of all point-of-sale payments, they come to 19% of all check payments. With growing adoption by merchants, BOC will convert 69% of the 4 billion checks that will be presented at the point of sale in 2010, the report predicts. With BOC, check-accepting businesses can collect checks at a central location?literally, a back office?and convert them to ACH debits. No authorization is necessary from the consumer. A posted notice at the checkout counter suffices. In this way, the new application?which was approved by NACHA, the rules-setting organization for the ACH, in May?overcomes two key problems with a 6-year-old check-conversion application, known as point-of-purchase (POP), that has largely failed to catch on with merchants. POP requires conversion at the cash register and signed authorization from the consumer, a process many merchants fear slows down transactions. Merchants also feel the need to equip each lane with check-scanning and ?imaging gear, a costly proposition. “[BOC] is essentially a 'do-over' for NACHA's largely unsuccessful point-of-sale check conversion approach,” says the Celent report, authored by senior analyst Robert Meara. Helping to prime the pump for BOC transactions, Meara says in the report, is the fact that a number of software vendors have already begun working with retailers to plan for and implement the application. Most of these products emphasize low cost and ease of operation, in contrast with POP, and bundle the application with check-guarantee and ?verification service, Meara says. Indeed, some vendors, including courier services and software companies, have already developed BOC services that allow retailers to outsource the back-office check-scanning and -imaging function (Digital Transactions News, Nov 3).