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Electronic Check Conversion (ECC)

Electronic Check Conversion (ECC) Defined

ECC stands for Electronic Check Conversion, and describes checks that are read and imaged at the point of purchase (POP) in a brick and mortar store for conversion into an electronic item. The resulting electronic draft is processed through the ACH Network for clearing and settlement. 

Electronic Check Conversion (ECC) Process & Requirements

This process requires a Terminal and Check Imager/Reader that is set up for ECC, and can only be legally done at the cash register (or point of purchase) of a regular brick and mortar type store. The legal requirement is that the check writer and the merchant be in a face to face situation.

1)    A customer at an ECC merchant presents the clerk or merchant with a check as payment for goods and/or services. 

2)    The clerk activates the ECC function on their point of sale terminal and keys in the dollar amount.

3)     He/she runs the check through their Check Imager/Reader, which a) reads the magnetic MICR line at the bottom of the check, and b) scans an image of the check for record keeping purposes.

4)     If the ECC provider has set up their system to run a check verification on the ECC transaction (most do), then the terminal will connect to a large checkwriter negative data base and verify that this checkwriter has not bounced checks and is not known to have a closed account. Some verification systems will also identify banks that are not participants in electronic drafting; these particular checks must be presented in paper form only, or they will be returned. 

5) The clerk receives the verification response on their Terminal. The transaction may be declined, it may be "non-ACH" (must remain paper), or it may be approved for ECC. If an item is declined at this stage, it is called a Verification Reject. 

6) The Terminal will generate a receipt for Approved ECC transactions, and the checkwriter is required to sign it, thereby authorizing the merchant to convert this item into an electronic draft.

7) Each party keeps a copy of the receipt, and the transaction is complete at the point of sale. 

8) At the end of the day, the merchant uploads their batch of check transactions and images. This is usually called a "Close" or "Batching Out".

9) The ACH Processor then receives the batch of transactions and prepares them for submission to the ACH Network.

10) New transactions are now checked against the Thompson Data Base of all US Banks to verify that all routing numbers are correct and valid. Some items are corrected and/or updated. Other items may not pass this step, and these are called ACH Rejects.  

11) The ACH Processor reports any ACH Rejects back to the merchant. Some processors will mail, fax, or email these reports to the merchant, and sometimes these reports are only generated once a week. Other processors provide Online Reporting and provide this data about 24 hours after the time of the transaction. 

Note on ACH Rejects: Typically there are very few ACH Rejects. In cases where an ACH Reject has occurred, the original image will be retrieved and used to either correct the electronic item, print a new paper item, or support traditional collections. 

12) Once the incoming ECC transactions have been cleansed and formatted for ACH Presentment, the ACH Processor generates additional ACH Transactions to settle funds to the merchant. Settlement can be immediate, with some solutions the funds will be available to the merchant in two to three business days. Settlement may be delayed to allow time for any bad items to be returned; the merchant would be paid only after 5 business-days have passed without these items being returned. Other ECC programs, like Cross-Check's,   may be tied into a check guarantee program; in these cases, the merchant is usually paid with no delay and any returned items are the responsibility of the guarantor. (Guarantee programs charge a discount rate of 1.8% or more, where-as straight ECC with Verification will start at around  $0.25 cents a transaction for very large merchants, but shouldn't exceed $0.50 for the average merchant.) 

13) Returned items will usually be Re-Presented  by the sophisticated ACH Engines, when possible. Failed transactions are usually charged back to the merchant. A returned item may be "floated" to the merchant (not charged back) under some programs; if the item can be represented, the service will attempt to collect again without taking the funds back from the merchant. Other services will immediately charge back the merchant, and then pay only after the items have been represented and cleared. Some services will charge a fee on each returned item, while others will not charge anything for returned items. Guarantee based ECC services will cover most returned items, but any that have failed to meet the guarantor's requirements will not be paid, and will be charged back.

Check Imaging:

• ECC requires that an Image of the converted checks is captured and stored for possible future retrieval.

Image Retrieval Costs vs. Image Upload Costs:

• Some ECC services will charge you for each uploaded image that they store, and allow free access to the stored images. 
• Other ECC services do not charge for the upload and storage, but charge for each Image retrieval processed

Online Image Retrieval:

Imaging services typically provide an Online Image Retrieval service, allowing merchants to use the web to access their stored images. 

Next Section: Guarantee ECC vs. Straight ECC & ECC Advantages >>>