heck 21 is here and making headlines across the country. As a merchant level salesperson (MLS), you have a unique opportunity to use the current news as a conversation starter with check-accepting businesses.

Although Check 21 technically defines the conversion of checks to electronic images through a bank or lockbox service, merchants can further benefit through point-of-purchase (POP) and accounts receivable conversion (ARC) services.

This article explores the opportunity that electronic check conversion presents, describes the drivers for acceptance and identifies conversation starters to help you explain the true value proposition for merchants.

The Opportunity

The electronic check market represents an incredible opportunity. Check acceptance is a necessary but burdensome part of conducting business. Checks account for approximately half of all consumer expenditures in the United States, with an estimated 15.8 billion written at the point of sale annually.

Extensive handling by financial institutions and retailers makes paper checks an expensive option. As a result, retailers, businesses and governments alike are looking for a more efficient means of accepting and processing checks.

Electronic check conversion is a direct response to customers' concerns about paper check-handling costs. Merchants benefit from faster funding, reduced processing costs and fewer losses. MLSs benefit by selling and supporting a service that generates revenue and improves merchant retention.

Typical Cost Savings

The costs of accepting, processing and handling paper checks are extremely high. Estimates for the real cost of a paper check range between $0.75 and $3, an average of $1.22 per check. On the other hand, for electronic checks, the cost drops to a range of $0.32 to $0.70 per check. Actual costs and potential savings will vary by merchant depending on several factors including volume of checks, risk, per item bank deposit fees and time and labor to prepare deposits.

Processing Options and Service Levels

When you hear "check conversion," do you think of a POP environment where both the consumer and the check are present? This is the typical environment and it certainly represents a large opportunity.

New markets are opened with the introduction of ARC processing where the check is present, but the consumer is not. This is typical of receivable payments, mail order purchases and companies that operate in a drop-box environment, such as apartment properties.

Often, ARC target markets are not credit card acceptors. These businesses usually know their customers, accept recurring payments and operate in consumer-not-present environments. They want the efficiency of electronic processing to reduce costs and improve the timeliness of deposits. Merchants provide customers with a notice explaining that checks will be processed electronically.

Another important factor for success concerns the proper alignment of service level to merchant needs. When looking for an electronic check service provider, it's important to work with a company that doesn't follow a one-size-fits-all model.

Many providers offer check guarantee services only. But as you'll see in the next section, merchants without a bad check problem often have a difficult time justifying the price vs. benefit of guarantee-level services.

MLSs should partner with providers that offer a variety of flexible service levels, including conversion only, check verification, check verification with collections and check guarantee.

Selling Check Conversion as a Payment Process

When selling electronic check services, you are selling a process and a better way of doing business, not just selling new equipment or services. You are selling faster funding, fewer headaches and greater cost savings.

Electronic check conversion addresses two major concerns for merchants: risk and convenience. In profiling merchants, it's useful to identify which of these two drivers aligns with your prospects' business needs.

Risk

For merchants where risk is a primary factor, you should position check conversion as an "insurance policy" to protect against fraud and returned items. These merchants: usually don't want to bother with collections; sell high-risk, high-ticket items; might have completed a service or have significant cash flow issues. Merchants driven by risk include consumer electronics retailers, jewelry stores, auto service and repair, veterinary services, merchants in tourist areas and accounting and legal services.

Convenience

For merchants where convenience is a primary factor, you should position check conversion as a "no hassle" alternative to paper checks. For the most part, these merchants know their customers.

Cash flow is an important issue, and check volume might be either high or low. These merchants: usually don't perceive uncollectible items as a problem; generally sell low-ticket items; and don't want to prepare deposits or deal with paperwork. Merchants driven by convenience include beauty salons/spas, dry cleaners, property management companies, pharmacies and healthcare providers.

Consultative Questions

Today's selling environment demands a constant sharpening of sales skills. This is particularly true when selling electronic check conversion services.

Here are some of the issues you may want to raise with prospects. These questions will help them focus on the daily issues they deal with in accepting checks and the tangible benefits they will realize with check conversion.

Conversation Starters

These opening questions help merchants focus on the aspects of their business that are impacted by check acceptance:

1. "Will you please tell me how you currently handle checks in your business? Do you accept a lot of checks? Do you accept checks from out of state?"
2. "Is cash flow important to your business? How long does it take for check funds to be deposited in your account?"
3. "What happens when checks you've accepted come back returned? How do you currently attempt to collect those funds? What are your success rates?"

Narrow Questions

These narrow questions guide customers to a specific topic of your choosing:

1. "Do you know your true cost for manually handling and depositing checks? Do you pay deposit fees? What are your costs for handling returned items?"
2. "What if you could settle all your non-cash payment activity on a daily basis and receive funding in 24 - 48 hours? Would this improve your cash management practices?"

Closing Questions

These open-ended questions help merchants understand how the benefits of check conversion will impact their everyday businesses:

1. "If you could reduce check risk and enjoy the convenience of electronic reconciliation while improving your back office efficiencies with one product solution, would you be interested?"
2. If your check funds could be deposited with the same speed and ease as your credit card deposits, would that improve your cash flow?"
3. "If all of your non-cash payments could be consolidated on your POS solution, on your reports and on your statements, would that make reconciliation easier?"

The Value Proposition and Payoff

Don't simply position check conversion as an "add on" to credit card processing. Look for merchants that fit the "risk" or "convenience" profile and determine the proper line of questioning that will lead to a payoff for you.

Check conversion is not a one-size-fits-all application. Do your homework and partner with a company that provides flexible service levels as well as solutions designed for both the POP and ARC environments. Understand the merchant drivers and align them with the proper solution.

Finally, do the numbers. The cost-savings analysis for check conversion has proven to be a no-brainer for a number of check-accepting businesses. Work with a provider that can provide you with costs-savings analysis tools to help prove the financial returns for merchants. And remember, successfully selling electronic check conversion means being prepared, persistent and professional.

Michelle Graff is Vice President of Marketing for NOVA Information Systems. E-mail her at michelle.graff@novainfo.com