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TigerDirect’s SECURE-eBill option allows users to pay through their bank accounts.

Get Smart: Use of Contactless-Payment Systems Growing

A berdeen Group of Boston released a benchmark report on the adoption of contactless-payment systems in the retail industry. The findings were based on extensive analysis conducted in September and December 2006 of the procedures, experiences and intentions relative to contactless-payment systems across hundreds of retail enterprises.

The study concluded that the adoption of contactless-payment systems, sometimes called smart cards, has reached the “tipping point.” Key findings of the study included:

Within 24 months, 58% of respondents indicated they will have a contactless-payment system in place within their organization;

Nearly 30% said they had already adopted or deployed a contactless-payment system;

Retailers said their top concerns for deploying contactless payments were lack of consumer adoption and potentially poor performance of the devices and technology supporting contactless payments; and

Challenges cited paralleled the concerns, namely integration with POS systems, training checkout associates and developing consumer enrollment to justify the investment in contactless systems.

The report, which can be acquired through www.aberdeen.com, highlights recommendations for and expectations for deployment, including: Retailers should test contactless payments in select locations for at least two quarters. They should expect to realize at least a 20% improvement in the throughput rate at the point of sale and a 10% improvement in customer satisfaction.

Alternative Online Payments

A number of online retailers are providing options for shoppers to buy now, pay later. Home Décor Products, NetShops Inc., Toshiba America Information Systems and the Sharper Image have begun to offer their shoppers a “Bill Me Later” credit-based payment option, facilitated by Omaha, Neb.-based First National Merchant Solutions. The “Bill Me Later” plan is designed for consumers who prefer not to divulge their credit-card information or who might not have a credit card on hand. After selecting the “Bill Me Later” option during the checkout process, shoppers receive instant credit to complete the purchase. A bill is issued in 14 days, giving consumers the option to pay in full or finance the purchase and pay through installments.

Similarly, online computer-hardware retailer TigerDirect has begun offering its customers an option to pay for purchases from their existing online bank accounts, the same way they might pay household bills by accessing checking or savings accounts through their banks’ Web sites. TigerDirect has partnered with MODASolutions of Philadelphia to provide the SECURE-eBill payment option. In a prepared statement, Tiger Direct CEO Gilbert Fiorentino stated, “The integration of SECURE-eBill’s credit card-free option is simply another great way to support our customers … and serve all online shoppers, while delivering the highest levels of security and fraud prevention with every transaction.”

New BOC Rule Alters Check Processing

The highly anticipated Back-Office Conversion (BOC) rule takes effect on March 16, allowing retailers to accept checks at the point of sale and convert them to electronic debits in a centralized location. Many retailers already convert paper checks to electronic transfers in a point-of-purchase (POP) process, but the new BOC rule is expected to provide greater efficiencies and reduce costs, particularly for stores with multiple checkout lanes.

BOC processing moves the electronic transfer from each checkout lane to a single “back-office” location, replacing the need for conversion technology at every POS terminal with one device in the back room. Additionally, the rules set by NACHA—The Electronics Payment Association differ for BOC vs. POP transactions. In POP transactions, each cashier had to be trained to obtain written authorization for the electronic transfer from the consumer and then return the scanned check to the customer after a transaction was completed. With BOC, the retailer retains the paper checks, simplifying the interaction between cashier and consumer.

However, BOC requires that a notice be posted at each POS location as well as printed on the customer’s receipt advising that the check will be converted into an electronic payment for ACH (automated clearinghouse) processing. Until Jan. 1, 2010, the posted notice must also contain an explanation that funds may be withdrawn the same day the retailer receives the check and the customer will not receive a cancelled check back from the financial institution. (For specific guidelines, refer to www.nacha.org or www.electronicpayments.org.) Under BOC, the retailer is required to maintain an image of the check for at least two years and is responsible for disposing of paper checks after the electronic transfer has been completed in the back office.