Retail lockbox check conversion

Today, Dec 2002 by Theisen, Keith K

DECISION PROCESSING LOGIC

Retail lockbox mail opening equipment uses basic Yes/No logic to detect inconsistencies in check sizes and in MICR line lengths. It is unable to look at routing numbers or MICR line detail. To enable customers to identif items ineligible for ACH conversion. Wells Fargo supplies software upgrades to make mail opening equipment smarter.

Decision processing logic is applied at two points in lockbox processing to identify items ineligible for conversion:

In the mail opening process where non-standard size checks as well as money orders and travelers checks are identified and separated: In the data capture equipment when ineligible items are pocketed as deposit vs. converted items. Processing logic driven by the consumer's billing account number as well as the routing number and account numbers from the check is programmed into the software that runs the equipment.

CONVERSION TABLES

Wells Fargo conversion tables explain the parsing routines for correctly obtaining the appropriate routing and transit number, account number, and check serial number needed to create a successful ACH transaction. For items drawn on the 2,000 financial institutions that do not accept ACH entries, we offer options to create and deposit drafts. The result is a 100% electronic solution.

MANAGING EXCEPTIONS

Changes in payment format and account information are the second most frequent cause of administrative returns. Consumers change banks or payment mechanisms. Credit unions change payable-through banks. Credit card companies begin using different routing numbers, and as a result. their convenience checks begin flowing into the lockbox-in eligible for conversion. Banks merge and change customers' account numbers. Each individual change triggers an NOC informing the ACH Originator that information in the Originator's files needs to be updated.

The changes are ongoing, as is the challenge of managing them. The Wells Fargo Express Check processing system is updated continuously to identify and convert new exception items. Internally developed automated interfaces notify and update customer platforms of new items as they appear. Wells Fargo decision logic is utilized for maintenance on four levels:

* Routing Number (Institutional Level)

* Routing Number and Account Number (Ranges)

* Consumer Billing ID (Consumer Leve)

* NOCs

PILOT RESULTS

With potential customer issues and ACH processing challenges pro-actively addressed, Wells Fargo Card Services' pilot results exceeded expectations on all fronts.

Customer acceptance-Resistance and/or negative response to check conversion were forecast at 4% of pilot customers. The actual response rate was less than 1%, due in part to the extensive customer communications effort.

In most cases, the number of customer responses corresponded closely to the percent of pilot customers by state. For example: Texas, with 4.19% of pilot participants, generated 4.51% of responses. Utah was an exception. With nearly 6% of pilot participants, Utah produced less than 2% of customer responses. Wal-Mart stores in Utah recently had rolled out check conversion and, in doing so, may have helped to educate customers and create acceptance.