The Green Sheet Online Edition
August 11, 2008 • Issue 08:08:01
Check processing diversification: Hop aboard
Personal paper-check volume is declining, but other types of automated clearing house (ACH) and check payments are increasing. This is a result of emerging technology, new laws passed by the federal government, consumer spending habits and market trends.
The diversification of check processing is critical to the payment processing arena, as this will enable ISOs and merchant level salespeople (MLSs) to capture larger margins and retain merchant business longer.
Following are several check solutions that are gaining momentum:
- Remote deposit capture (RDC) allows checks to be remotely deposited into banks using check images.
- Checks by Web is integrated into merchant Web sites or ISO virtual terminals.
- Checks by phone is initiated through inbound call centers, utility companies and bill payment providers.
- Back office conversion enables checks to be converted in back office environments.
- Internet video recording-based conversion, a solution for mobile merchants, enables processing via cell phones.
- Accounts receivable lockbox is employed by merchants who receive checks in the mail or at drop box locations.
- Recurring debit allows merchants to initiate recurring, monthly ACH payments from clients.
An especially popular solution picking up speed is RDC, which became legal with the 2004 implementation of the Check Clearing for the 21st Century Act (known as Check 21).
RDC adoption has exploded within banks and other financial institutions; there is plenty of opportunity to implement this product across all market spheres. Businesses can use RDC to scan checks for processing and eliminate trips to the bank. The solution also cuts down on lost or misplaced checks and enables fast, accurate check posting to customer accounts.
RDC is changing the way many larger commercial enterprises accept payments. They are realizing significantly reduced operating costs and bank transaction fees, as well as improved funds availability. For ISOs and MLSs, the RDC market is virtually untapped, but merchants are beginning to employ RDC to enhance sales, and this solution will increasingly impact sales strategies and marketing efforts within our industry.
What does this mean to me?
By offering new check processing solutions, you can expect increased profits, higher volume, better retention, more diverse product offering and the ability to separate your ISO from competitors targeting the same merchants.
The key challenge is training agents on the unique prospecting techniques that are required to find clients who need these types of solutions.
Market conditions and spending trends are impacting everyone's volume and bottom line more severely than in the past. Finding unique angles and strategies for developing a more diverse and profitable portfolio continues to be the big challenge for ISOs and MLSs today.
Sales offices that can find ways to shift focus and sales initiatives to adapt to these trends will stay on top.
ISOs and MLSs will earn much larger streams of income selling check solutions. Many feet on the street are shaving bankcard rates just above interchange to capture merchant business. It is clear they can make much more if they sell check processing services.
Typical ISO or MLS profit for check conversion services can range from 30 to more than 80 basis points. This healthy return is no longer possible solely with bankcard processing.
What are the challenges?
Many ISOs and MLSs have not pushed check services because of the following beliefs and perceptions:
- Checks are on the decline and are not important to merchants.
- The payments industry's core initiative is bankcard processing; other value added services are not as important.
- ISOs and MLSs have lost merchant relationships when check processors have not funded their merchants.
- Check processors are not proactive and do not provide ongoing training or sales material.
- It is hard to train the agents to understand and sell the multiple types of check processing services.
- Typical ISO and MLS target merchants are not inclined to accept checks.
Some of these challenges are, in fact, substantive issues for many. It's important to identify and uncover them upfront before you begin any future initiative to push check services sales. The main goal is to mitigate all obstacles so that your efforts are more effective and yield higher results.
Another challenge is to reprogram your sales force to think check and not just bankcard. This mindset starts with upper management and trickles down to everyone else. Without the top executives onboard, overall sales efforts will eventually fizzle out.
For some, this transition will be easy; for others it will not. It's important to go after merchants who will use check services. If your sales team is selling restaurants or retail only, they will struggle to find a satisfactory volume of check deals.
If needed, assign a core group to research and target merchants who would be a good fit for the various check processing solutions you intend to offer. And to find deals, agents will need to shift some prospecting time to nontraditional merchant types and explore a diversity of back office environments.
How can I get started?
The first step is to become educated on the many benefits of check processing diversification - for you and your merchant prospects and customers. After you have identified the advantages and benefits, the next step is to create an action plan.
- Call a meeting with your sales team to discuss the types of merchants they are already targeting.
- Evaluate your portfolio to determine what types of merchants could use particular check services.
- Review your current check vendor(s) and request updated material and pricing; make sure your partners are ready to help with training and ongoing sales efforts.
- Develop check sales and marketing materials that will help your team both in the field and over the phone.
- Make it clear to the team that this initiative is a priority and that you want results.
- Implement an aggressive compensation plan for MLSs that motivates them to sell check services.
- Implement a system that tracks and measures efforts of the sales team; uncover and eliminate all obstacles you encounter.
Shifting any sales efforts away from bankcard can be painful if not done with precision. But the results will be rewarding. Additional revenues that ensue will show that selling check services is critical to expansion within the ever-shifting payments industry.
It may be true that some merchants neither need nor want check processing services. However, many merchants who are not being pitched these services are, in fact, interested in them. Not continually cross-selling or even mentioning that these services are available opens up access for another provider to slide in, offer check processing, and take your merchant business away.
In the United States, consumer and business checking accounts will always include paper checks as a form of payment. Checks are not going away and will always be used and accepted by a substantial base of customers and merchants. It's time to make selling check services a larger part of your ongoing efforts - today and into the future.
Christian Murray is the Director of Business Development for Global eTelecom Inc. He has more than 12 years' experience within the payments industry. GETI provides check processing and gift and loyalty solutions. For more information, visit www.checktraining.com and www.giftcardtraining.com, or contact Christian directly at 877-454-3835 or firstname.lastname@example.org.
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