A new National Automated Clearing House Association advisory group will seek a way to stop the flow of paper checks by converting them to electronic form when they are first presented.
The advisory group, known as the Electronic Check Council, will research and develop products to speed up check collection, including truncation at retail lockbox collection sites.
Unlike electronic check presentment, which moves check data electronically ahead of the paper, Nacha envisions converting checks into automated clearing house transactions to completely halt the flow of checks in the collection process.
"The Electronic Check Council will be committed to developing and implementing a system, including rules and formats, that will make check conversion at the point of sale a reality," said Elliot McEntee, Nacha's president and chief executive officer.
The Herndon, Va.-based association, responsible for developing and maintaining rules for the automated clearing house network, recently made overtures to a multitude of other clearing houses and individual banks to participate with the council.
Invitations went out to the Federal Reserve banks, the Electronic Check Clearing House Organization, a Dallas-based clearing house for electronically presented checks; and the National Clearinghouse Association of Columbus, Ohio, a private-sector alternative to the Federal Reserve's check clearing services.
Officials with the association said participants will be the New York Clearing House Association; Wespay, San Bruno, Calif.; National Organization of Clearing Houses, Washington; Internet Inc., Reston, Va.; and Seafirst Corp., Seattle.
Keith Daniels, senior vice president with the International Bank of Commerce, San Antonio, Texas, said the council was created from Nacha's electronic check committee, which will cease to exist sometime in 1995. The new council, he said, represents "other players in the electronic arena."
One of the main factors in forming the council was the demand among retail businesses, who have clamored for a product that reduces fraud and enables businesses to "collect a lot faster."
"A lot of this is being looked at from a cost-benefits basis for a lot of merchants," said Mr. Daniels, who is also a member of the council.
"Some retailers are very serious about transactions at the point of sale," agreed Ned Miltko, an administrator of the Columbus, Ohio-based National Clearinghouse.
"In looking at the losses by the banking industry from fraud, the retailers' losses are many times larger," he said.
Mr. Miltko, who is also a consultant with Littlewood, Shain & Co., Exton, Pa., said the National Clearinghouse will participate with the council because there was "substance" to Nacha's efforts to assemble several organizations with common interests.
"We had a meeting with Elliot McEntee earlier this year and we talked broadly about cooperation in the private sector."
Bruce Brett, senior vice president with Signet Bancorp, Richmond, Va., thought the concept of uniting several organizations with common interests was a good idea.
Signet will "be a part of the development," he said, noting the basic infrastructure for a future product was largely in place.
But Mr. Brett said the council will have to grapple with Regulation E, which are Fed guidelines for electronic funds transfers.
"At the point of sale, does that thing become an ACH item and subject to a lot of disclosure, or is it still a check?" Mr. Brett asked. "There will have to be discussions and some rule revisions."
George White, president of White Papers Inc., a Montclair, N.J.-based consulting company, has advocated check truncation at the point of sale for several years.
"I say, and other bankers have said, that it's not the check that's the problem, its the movement of the check," Mr. White said. "The check can basically be an authorization to pay."
