The ability to prevent check fraud is critical for businesses of all sizes and across all sectors. After all, checks are still the predominant method of payment for goods in the United States. Fortunately, new technologies are making the process of safeguarding against check fraud simpler and more cost-efficient.
“There are billions of checks written in the United States every year with over 30 billion projected in 2008,” says Regina Calhoun, manager of national check sales for Comerica Merchant Services. “Protection against check fraud and its associated losses becomes paramount to a business’s financial vitality.”
Smart Business spoke with Calhoun about how checking solutions have advanced, the advantages of accepting checks and what kind of fraud protection and security measures are available.
How have checking solutions advanced in recent years?
Checks are converted electronically now at the point of sale. Checks are taken for COD (cash on delivery) for catalog merchants or any type of mail order merchant. Anybody that is shipping goods and products can take checks via the Internet. Also, the consumer can mail a check into the merchant and have the funds guaranteed.
Advanced checking solutions available through banks make the process of check acceptance simple. Merchants just need to check their customers’ IDs and get a phone number that they write on the check. The merchants can then convert the check, deposit the check into their bank, or use back office conversion, which is ideal for merchants who have locations throughout the country and want their accounting centralized. Back office conversion allows each individual branch to scan their checks through a machine so they don’t have to physically take them to the bank every night.
How does the cost of check acceptance compare to credit card acceptance?
There is an incredible difference. All of the regulations pertaining to credit cards are consumer driven. Most of the issuing banks allow a consumer to dispute a charge for up to 180 days. Check guarantees, which include stop payment coverage, eliminate the risk of charge-backs for businesses. Let’s say I write a check to a merchant and then become unhappy with that merchant. Even if I put a stop payment on the check, the merchant will still be covered on those funds.
How do delayed payment programs work?
A delayed payment program allows merchants the ability to provide customers with a flexible payment option that helps increase the probability of closing a sale. This service allows the customer to delay check settlement for up to 30 days while the merchant receives full funding within 48 hours. Furniture companies, auto dealerships and those in the medical field often take advantage of delayed payment programs because they get their money upfront. Everyone is happy because the customers gets their product and the merchant is funded within 48 hours.
What kinds of fraud protection and security measures are available with checks?
Checks operate off of databases with assigned risks and parameters. It’s like when you use a credit card to make a very large purchase that falls outside of your normal spending parameters; your credit card company will be on the phone with you. In the checking world the merchant receives a response called ‘call center.’ The merchant calls its bank who speaks with the writer of the check to confirm his or her identity and make sure the transaction is not fraudulent.
When accepting a check you want to make sure it is not a check printed off of someone’s computer. There is a specific type of magnetic ink on legitimate checks. One of the easiest things to do is to rub your fingers along the MICR line that contains the routing and account numbers. If the ink rubs, it is a fraudulent check.
How should a company go about selecting a financial institution that will meet its check processing needs?
Research, research, research. There are several Web sites out there, including the Better Business Bureau’s, that have extremely good information. After you’ve conducted your initial research, put together the criteria you’re looking for, go out for bids and have people come in and present their products. Ultimately, it’s important to pick a financial institution that will be the best fit for your business.
REGINA CALHOUN is manager of national check sales for Comerica Merchant Services. Reach her at (713) 898-1584 or firstname.lastname@example.org.