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CoverStory
"So that's the real opportunity here for any sales organizations," he said.
Danne Buchanan, Chief Executive Officer of NetDeposit Inc., believes many
banks haven't aggressively marketed RDC to small and mid-sized businesses.
He also noted that banks offering RDC products require merchants to open up
new – or move existing – relationships, which is a lot of work for small business
owners.
"One of the biggest opportunities for an ISO over a bank is that an ISO doesn't
require merchants to change their bank relationship, which is very meaningful
in terms of selling a product," Buchanan said. "I expect ISOs and MLSs to get
pretty aggressive in the marketplace over the next year once they get their feet
wet and learn the market."
Alphabet soup legalese
RDC products and services are evolving and improving rapidly to maintain
consumer confidence and meet security standards that are critical for successful
end-to-end transactions.
There are different sets of security standards and regulations in terms of the
physical capture and deposit of checks as electronic images. "There's a whole
bunch of rules behind electronic check payments," Ficarra said.
Check payments are governed by the Uniform Commercial Code (UCC),
Articles 3 and 4a, a uniform set of laws adopted state-by-state that regulate
electronic check imaging. Electronic payments like ACH, credit, debit
and electronic benefits transfer are
federally mandated under Part 205,
Regulation E of the Electronic Funds
Transfer (EFT) Act of 1978.
The most important difference
between the UCC and Regulation
E is in the time a consumer has to
contest a transaction: 45 days under
UCC and 60 days under Regulation
E. Allowing time for posting and
statement issues, under Regulation
E, consumers could have up to 80
days to contest transactions. And
federal law trumps state law, so
when a check is converted for ACH
processing, it is no longer a check,
but an EFT transaction.
Therefore, if a company authorizes
and converts a check to an ACH
item, it owns that risk for 80 days.
However, it can reduce the risk
to 45 days if it simply scans the check
and clears it through the Federal
Reserve's electronic check clearing
services. Most checks today clear just
as fast, if not faster, than ACH items.
And the risk is smaller because check
images are scanned front and back.
Many companies today offer RDC
products that take advantage of both
sets of rules.
After merchants swipe checks
through readers, processors can
decide whether to clear them as
Regulation E items or as electronic
checks.
Ever-changing landscape
"[RDC] is still a newer product in the
technology curve, but it's certainly
gotten a lot of traction quickly,"
said Steve Buchberger, Senior Vice
President, Solutions Management
for Wausau Financial Systems.
"We're just now seeing more interest
from FIs in the small business
market.
The solutions have matured in capabilities
as well as ease of deployment
with Web-based solutions, which I
think is critical for an ISO market."