Electronic check conversion uses a special scanner that reads the face of a check to collect the customers name, routing number and the account number of the issuing financial institution to create a digital funds transfer into the merchant's bank. It does not typically require the customer to write the actual check to the merchant, but does require the customer to sign a receipt for the transaction.
The process of electronic check conversion takes places directly at the point of sale and begins with the customer providing the merchant with a check written out for the amount due, made out to the merchant or voided. The sales associate then takes the check and inserts it into a special scanner that reads all the relevant information from the front of the check and processes it with special software to create an electronic transaction that functions in the same manner as a debit card transaction. If the customer has the appropriate funds in the account tied to the check, the transaction continues, otherwise the system immediately rejects the payment.
Successful transactions occur through the Federal Reserve's Automated Clearing House system, which takes the funds out of the customer's account and transfers them into the merchant's account immediately, with varying processing times depending on the financial institutions. The customer then receives a receipt for the transactions and signs it to serve as consent for the charges.