Once again, the check elimination movement will be receiving a boost from the financial services industry this May as the month is ushered in as Direct Deposit and Direct Payments Month.
An industry group led by NACHA, Electronic Payments Network and the Federal Reserve Banks are sponsoring the campaign to encourage businesses, governments and individuals to ditch their checkbooks in favor of electronic payments.
According to Mark Tizzard, VP of strategic migration at Charlotte, N.C.-based Wachovia and chairman of NACHA's marketing management group, the month of May has been singled out for a few years now as a time for the industry to concentrate its efforts on promoting e-payments. What's new about this year's campaign is that a new interactive Website (www.electronicpayments.org) is being introduced as a "one-stop site for information on all kinds of electronic payments," Tizzard explains.
Education will be extremely important in this campaignnot only for consumers, but for businesses as well. Research from NACHA showed that only 26 percent of small businesses used direct deposit to pay their employees. In fact, 42 percent of these companies said they thought the service was only for large businesses. There is a definite lack of knowledge out there, says Tizzard. "Small and midsize businesses are simply not aware that using direct deposit for payroll and expense reimbursement can save against their bottom line. Even $1,000 savings a year can mean success or failure for a small company."
He says that some small business owners might think it's easier to simply cut a few checks a month than to use direct deposit. "Also, the owner might think that it is going to take a lot of time to transition to direct deposit and that the initial set up charges are expensive," Tizzard explains. "However, if the company has a good relationship with its financial institution, using direct deposit will save it time and money immediately."
The program is also targeting consumers, both on its Website and through various advertising campaigns. However, "we think that organizations with direct contact with consumers, businesses, advocacy groups and financial institutions have a better opportunity to convince their constituents to sign up for the services," relates Tizzard.
As for banks and other financial institutions, he says that offering these services is almost a must today if they wish to remain competitive and retain customers.
"Our goal is to make the nation's payments system more effective while saving businesses money and trying to help consumers have better control of their finances. We believe we will accomplish this by increasing the use of electronic payments and decreasing the use of checks. There are many kinds of electronic payments, but direct deposit and direct payments are the only services that are completely paper free and truly automatic."