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Electronic Check Conversions Increased Sixfold In 2004

Converting paper checks into electronic transactions cuts processing costs and speeds access to funds.

Bill payments made by paper check are getting converted into electronic transactions at breakneck speed. The number of so-called accounts-receivable conversions totaled 1.25 billion transactions in 2004, a sixfold increase over 2003, according to statistics released Monday by the Electronic Payments Association.

Recurring electronic payments such as payroll deposits, Social Security benefits, tax refunds, and preauthorized debits totaled 12 billion transactions in 2004, up 20% over 2003. More than half (54%) of that increase was provided by accounts-receivable conversions.

By converting paper checks into electronic transactions, companies save on manual processing costs and gain access to funds more quickly. Most of the conversions take place at retail lockboxes--bank-operated facilities that receive and process bill payments on behalf of companies.

Banks are catering to the demand for electronic checks. On Monday, J.P. Morgan Chase & Co. unveiled Distributed Payment Capture, a software product that lets businesses scan checks on low- to medium-speed image-capture devices, then convert them into electronic checks. The product is targeted at smaller companies that process their own mail-in payments, as well as companies that use lockboxes for mail-in payments but also operate walk-in bill-payment centers, such as cable, telephone, and utility companies. Eight companies have deployed the product, says Alan Koenigsberg, VP at J.P. Morgan Chase Treasury Services.

Accounts-receivable conversion is one of several forms of electronic check, in which check transactions get converted into electronic debits. Others include Web- and telephone-based check payments and checks written at the cash register and converted into E-checks by the retailer. Electronic checks don't include debit-card transactions.

There were a total of 967 million Web-based E-check transactions in 2004, up 40% over 2003. About 80% of those transactions were for recurring bill payments.

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