Electronic Checking Processing Leads to the Imminent End of the Paper Check

Nov 27, 2015

September 11, 2001 was the beginning of the slow death of the paper check. Before that day, money was moved across the U.S. very differently than it is now. Banks moved paper checks by truck to central processing centers. They were then sorted and bundled onto airplanes for further transportation.

On any given day, there was around $6 billion in the air flying from one destination to another. In the wake of the 9/11 terrorist attacks, that number rose to $47 billion due to the FAA grounding planes. This led to the Check 21 Act. This act allowed banks to use electronic images, instead of relying solely on paper checks.

The rest is history. Electronic check processing has experienced great success. There are very few payments that take place today that are settled between banks using paper checks. In fact, according to a study published last year by the Federal Reserve Bank of Philadelphia (PDF), even substitute checks – allowed by the Check 21 Act – were “practically zero” by 2011.

The number of checks being used by U.S. consumers continues to slowly drop year by year. In 2009, the number of check written by consumers and businesses was 28 billion. This amount has dropped about 1.8 billion each year. According to the Philadelphia Fed study, “Getting Rid of Paper: Savings from Check 21”, paper checks will be eliminated entirely by 2026.

This study also estimated that electronic check processing is saving the banking system $1.2 billion a year. In addition, consumers and businesses are getting $2 billion in benefits from the faster payment processing. These numbers may come as a surprise to the average banking customer or small business who are completely unaware of the short lifespan of their checks.

One of the biggest influences on electronic check processing is smartphone and tablet commerce and Internet-enabled in-store payment options, like Square and LevelUp. These improvements have led payment processors, like EMB, to offer the very latest in electronic check processing. Other major companies have made changes in the way they accept payments as well.

For example, Amazon allowed its customers to use checks to pay for their purchases if they were leery of using their credit card. In 2008, Amazon discontinued this as a payment option. Chicago payment company, Braintree, recently acquired Venmo in order to build a digital wallet for mobile transactions; this move could make more payments all-electronic. In addition, Square, with its iconic credit-card swiper, is used for much more than a cash replacement for coffee shops. It is often used for artists, massage therapists and other professionals who would normally accept checks.

With all of these changes, the death of the paper check appears imminent. Electronic check processing is opening up new opportunities for business to offer their customer’s the easiest and fastest in payment processing options. The continued shift to e-commerce and mobile payments is a big shift in favor of electronic check processing.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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