Most retailers are using a payments provider to collect their returned checks electronically. Did you know the electronic method providers use can generate over $140 in unnecessary overdraft fees for check writers? It is an unfair and profitable process that 99.99% of the payment providers are using. Perhaps it is time to open up Pandora’s Box.
Payment providers get away with using a sub-standard process because retailers do not have a clear understanding of the electronic recovery process for returned items. As a result of excessive bank fees, customers are paying off their bank debts instead of their payment debts to the retailers.
There is another electronic process that providers could use to save check writers from those exorbitant overdraft fees, but few companies have invested in it. This process called a smart re-presentment entails calling check writers’ banks to verify the funds prior to electronically re-presenting returned checks. The financial obstacle for providers is the investment in the call center. electronic shops mahadevapura
First, let’s clarify how the ACH electronic process generates overdraft fees. Payment providers re-present the returned check and the allowable state fee as two ACH debits to the customer’s account. If there are inadequate funds to cover the debits, both transactions bounce just like a bad check, and the customer is hit with two more overdraft fees ($35 avg.). Payment providers are allowed to do this two times on every check, potentially causing a total of four overdraft fees ($140 avg.) that could be avoided. Only the bank wins in this scenario.
Here is the slippery secret. There are actually two methods to re-present checks electronically. The first, rarely used process calls the customer’s bank to verify the appropriate funds before re-presenting the check and state fee. This equitable process requires an expensive call center that most payment providers refuse to do. The second, popular method simply debits the account blindly hoping there are funds in the account; this requires the push of a button. Often times, the second attempt at collection is called a timed re-presentment and coincides with a typical payday (1st and 15th of the month), but it is still unreliable. Can you guess which one 99.99% of the payments industry providers use?
Make sure the company you are considering or currently using is verifying funds before they re-present the checks. Be very specific and ask them two key questions: “Do you verify funds throughout the entire process and if so, where do you house your call center?” Confirming the verification process protects your loyal customers and valuable reputation. Since these check writers experience significantly fewer overdraft fees, they pay off 11% more of their retail debt than the rest of the industry. It’s a win-win for both retailers and their customers even though it reduces the provider’s line.