Merchants have always been apprehensive about accepting checks due to the risks and hassles associated with check acceptance. Check Conversion is one process that comes to the aid of merchants as well as customers by offering a faster, safer and cost-effective mode of check payments. More and more shoppers are accepting check conversion as a quick and easy way to pay for goods and services.

Check conversion transforms paper checks into electronic transactions--also known as e-checks--that are securely processed in real-time. Funds from authorized payments are deposited automatically into merchants' accounts, usually within two business days. The conversion process involves the following steps:

• A customer presents a paper check at the point of sale.

• The merchant uses a magnetic ink character recognition (MICR) check reader to scan the check and capture bank account information. (Some point-of-sale terminals also offer imaging capabilities, which capture address information for added security.)
• The terminal electronically sends the account data and dollar amount of the sale to the check service provider for verification.
• The check service provider approves or declines the transaction.
• If it is approved, the customer signs a sales receipt, which authorizes the merchant to debit the customer's account.
• The check is franked--that is, it is marked or stamped as processed--and voided; then it is returned to the customer, along with a copy of the sales receipt.
• In as little as two business days, an automated clearing house (ACH) deposit posts the amount of the sale to the merchant's direct deposit account.

Merchants benefit in a number of ways. Firstly, all converted checks are verified, usually at no extra charge. Merchants are guaranteed their funds from approved transactions, because returned checks are the responsibility of their check service providers. Secondly, electronic batch closing eliminates errors and reduces time spent in preparing and reconciling deposits. Thirdly, it results in improved cash flow due to faster closing and settlement.

Merchants van either connect MICR check readers to their existing equipment or upgrade their payment equipment by using terminals with integrated check readers that offer increased processing power and automatic check franking and reduces the excessive cabling at the point of sale. These also include reporting features that facilitate bookkeeping.