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The Color of E-Money


NACHA-The Electronic Payments Association has launched a green initiative and formed an industry coalition dedicated to delivering information, resources and tools that will help businesses and consumers make “eco-payment decisions” and reduce reliance on paper statements and paper-based payments.

In its project brief introducing the green initiative, NACHA noted that electronic payments are “inherently green,” a fact intuitively understood by financial institutions but less obvious to consumers. As a general rule, retailers’ appreciation of electronic payments as a business process that supports sustainability is greater than the average consumer’s but not as fully developed as that of the financial industry.

Craig Vaream, VP and ACH product executive at JP Morgan Chase in New York City, is serving as co-chairman of the NACHA green initiative. In an interview with Chain Store Age, Vaream noted that the coalition will provide an opportunity for retailers to learn and take a leadership position by sharing thoughts on eco-friendly electronic transactions.

He cited a number of processes within the retail environment that are easily converted from paper to electronic transactions. For instance, paper checks accepted at the point of sale are more efficiently processed electronically either through back-office conversion (BOC) or at the point of purchase (POP).

In both scenarios, the checks are scanned into the retailer’s system and transmitted electronically to the financial institution, eliminating wasteful manual processes as well as the costs of transportation and paper handling. Under BOC, the retailer retains the check and shreds it after the electronic transfer has been completed. In POP, the check is scanned at the point of sale and returned to the customer.

“Whether payments are coming into the retail organization or disbursements are going out, electronic transactions are always more efficient,” continued Vaream. “Another area where retailers can make improvements is by converting employee compensation from paper checks to direct deposits.

“In addition to eliminating the paper used to print the checks, paper is also saved because deposit slips are not required at the financial institution. From a corporate perspective, direct deposit also makes it easier and more efficient for the retailer to manage cash flow because it knows when the payments are presented for deposit.”

Direct deposit is a predictable, consistent process and retailers are discovering similar incentives for converting vendor payments from paper to electronic transactions. “There are financial reasons as well as environmental reasons for converting to electronic payments,” said Vaream. “Many retail corporations are pretty savvy about where they can maximize working capital, and converting to electronic payments is certainly one of the best opportunities.”

Based in Herndon, Va., NACHA is uniquely positioned to promote the green values of electronic payments because the not-for-profit organization develops operating rules and business practices for the Automated Clearing House (ACH) network. As more companies replace paper with e-payments, fewer checks will be written and the cost of processing those paper transactions will become even more expensive, Vaream predicted.

NACHA announced that ACH volumes grew 15% last year and were tracking at a comparable rate of growth this year. However, Vaream noted the highest future growth areas for electronic payments are in transactions conducted over the Web and phone.

At presstime, the name of NACHA’s green coalition was undetermined but the campaign is on track to launch in April 2008. NACHA expected to have a minimum of 15 investment partners and had already secured commitments from 10 partners, among them Bank of America, Citigroup, CheckFree Corp., JP Morgan Chase, the U.S. Federal Reserve Financial Services, Wachovia and Wells Fargo.

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