"How to Reduce Fraud and Increase Profits by Using Electronic Check Verification"
- By Bob Twain
Remember the days, standing in line at the market and seeing a
bulletin board behind the cash register with bad checks tacked to it?
As a child, standing in line next to my mom or dad I used to look at
that board and think "how awful for those people to have their names
up there." I'm sure others thought "How awful for those people to
have written bad checks." Both are valid concerns, especially as a
What if you could eliminate both the unfortunate customer experience
of having written a bad check and the cost to your business of not
collecting the funds for items purchased? Not to mention the NSF
charges and timely paperwork to reconcile the bad checks.
That's where today's electronic check verification systems can help.
Despite the fact that according to the Federal Reserve Board the use
of checks as a payment system is on the decline, more than 70 billion
checks are still tendered each year. That number is too big for most
retailers to ignore. Clearly, the more checks you're able to process
successfully, the higher your profits.
- What if you could completely eliminate, or seriously reduce, the
number of bad checks that pass through your business?
- What if you could collect on 80% of all bad checks for free?
- What if the company that verified the check paid you 100% of all
verified checks that bounced?
- What if you could eliminate the unfortunate customer service task
of collecting on bad checks?
- What if you could speed up your current check verification system
to provide faster, better customer service?
How do Electronic Check Verification Systems Work?
There are actually two main types of verification services. One
common service offers to compare the check to a negative database of
bad check records. This type of system actually started about 20
years ago and even with the delays of the earlier system, merchants
saw a significant decline in bad checks.
Today, thanks to faster POS software systems and electronic check
readers, many companies now offer instant electronic access to their
vast databases to compare checks. In many cases you're able to
customize the criteria that the checks are evaluated by, thus allowing
you to determine the level of risk that you are willing to take.
The next type of verification system that is gaining in popularity is
real time verification where in addition to comparing the check to a
database, the client's bank account is immediately accessed to
determine sufficient funds.
But wait there's more!
Earlier I asked you "what if you could collect on 80% of your bad
checks." In addition to instant check verification, many services
offer collections on verified checks that bounce and guarantee a
percentage of collection up to 80%. Some even offer to pay you 100%
of all verified checks that bounce.
These services usually employ traditional collection practices
including phone calls and letters but they have the additional ability
to electronically represent the checks to the bank for payment when
the account is more likely to have the necessary funds. The 1st and
the 15th of the month are common times for checks to be represented
because they're a common payday.
So... How do you get Electronic Check Verification for Your Business?
If you already have Point of Sale software that you are happy with,
then your first step is to find out which check verification systems
are compatible with your current system. A simple phone call to your
customer service representative should give you your answer.
Additionally, some POS software manufacturers offer integrated Check
Verification services meaning that you don't have to pay for the
programming fees that other companies may charge.
A check reader is optional but a point of sale computer is required.
However, without a check reader the keying of the check's information
into your terminal will be necessary. You may want to consider
purchasing a check reader to make the verification process more
efficient for both you and the customer. Generally, a check reader
costs less than $400 and quickly earns back the cost of investment.
The following companies manufacture Check Readers:
Once you've determined which check verification companies are
compatible with your POS system consider the following:
If you currently do not have Point of Sale Software you're not out of
luck. However, your options are limited to phone and internet
verification systems, which simply connect your check reader, provided
by your merchant services provider, via phone line or modem. They
operate much like a credit card reader would. Your customer's check
information is read electronically and then compared to a negative
database and/or sufficient funds are verified in their account.
- Look for the largest national negative database possible
- Make sure that the database has a substantial number of merchants
in your geographic area.
- Look for a verification system that provides not just negative
data, but also positive data.
- Look for a verification system that has customizable risk
assessment tools and utilizes "Rule Sets"; these are programs that
analyze variables to screen out adverse risks as defined for
specific business types.
- Look for the lowest transaction fee, monthly minimum and
- Look for a low cost per transaction. Verification transactions
usually cost around $0.25/per item.
The benefit to having your check verification system tied directly
into a POS system is that the transactions, information, and all
necessary tracking of the accounts are done automatically, thus
eliminating the many steps of paperwork that would still be required
if you operated a check verification system independent of a POS
software system. Additionally, you're adding the extra security that
your customers deserve by having your transactions, check verification
included, run through a secure point of sale software system.
The following companies are among the largest Check Verification
services in the country:
If you do not currently have a point of sale system for your business
it may be beneficial to consider one. POS software is, at its
simplest, a computer program that takes the place of a simple cash
register. All sales are made through the computer. You enter the
information, sales and transactions, and it records and tracks
everything, including bounced checks and recovered funds. They don't
have to cost much and leasing is an option. For more information on
purchasing a POS software product visit:
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