As more businesses look to streamline payments, check processing through digital channels continues to evolve. Two common methods often confused, or used interchangeably, are Remote Deposit Capture (RDC) and ACH check conversion. While both can involve taking a paper check and digitizing it, they differ significantly in how the transaction is processed, how the authorization works, and ultimately how the transaction appears to the consumer. These differences matter, not just from a technical standpoint, but also for maintaining transparency and trust with your customers.
Let’s break down the key distinctions between RDC-based check processing and ACH check conversion, and why it’s important to clearly understand and communicate which path you’re using.
What Is Remote Deposit Capture (RDC)?
Remote Deposit Capture is a process where a paper check is scanned or photographed and submitted electronically to a bank for deposit. In this model, the check remains a check throughout its lifecycle—it’s just being transmitted and processed electronically rather than physically deposited.
When using RDC:
- The check image is retained.
- The transaction is settled through the check clearing system (often using Check 21 image exchange).
- The consumer’s bank typically displays the transaction as a check, and often the check image is available in the online banking portal.
- Authorization follows traditional check rules, no new or separate notice is typically needed, since the customer knows they wrote a check.
From the customer’s perspective, this is a familiar experience: they write a check, and it clears their account as a check.
What Is ACH Check Conversion?
ACH check conversion takes a different approach. Here, a paper check is used as a source of information, primarily the account and routing number, and the payment is converted into an ACH debit. The original check is not processed as a check; it is instead used to initiate an electronic funds transfer through the ACH network.
This method is common at retail point-of-sale (POS) locations, over the phone, or for mailed-in bill payments. Depending on the context, the transaction is categorized as ARC (Accounts Receivable Conversion), BOC (Back Office Conversion), or POP (Point-of-Purchase), each with specific authorization and notification requirements under NACHA rules.
For example:
- With ARC (used for mailed-in payments), the business must provide a clear and conspicuous notice on the billing statement or remittance stub.
- With POP (used at the point of purchase), a notice must be provided and the check returned to the consumer immediately.
- With BOC (used in back-office environments), signage must be clearly posted at the point of collection.
In all cases, explicit notice is required to inform the consumer that their check will not be processed as a check, but instead as an ACH debit. That’s a critical distinction, both legally and in terms of user experience.
Consumer Confusion: Where It Arises
This is where the rubber meets the road, or should we say where the check meets the transaction. Many consumers don’t understand that a check can be “converted” into something other than a check. They wrote a check, so they expect it to behave like one. But when it’s processed as ACH:
- The transaction shows up in their online banking as an ACH debit, not a check.
- There’s no image available for review.
- The descriptor on the transaction may not be immediately recognizable.
For some consumers, this leads to questions or disputes, particularly if they weren’t clearly notified that their check would be processed differently. The issue isn’t just technical, it’s perceptual. The consumer feels disconnected from the transaction they initiated, which can lead to customer service issues or even chargebacks.
The Case for Staying with Check Processing via RDC
Given these concerns, many businesses—especially those in professional services, property management, healthcare, and other trust-centric industries—opt to keep the check as a check. With RDC, the processing method is more aligned with consumer expectations:
- There’s continuity between the action (writing a check) and the outcome (seeing a check image cleared from their account).
- No special signage or notice is needed beyond standard check handling disclosures.
- There’s less room for consumer confusion or disputes.
From an operational perspective, RDC also allows for easier reconciliation and audit trails, particularly when check images are retained and linked to accounting systems.
Final Thoughts
As you evaluate or refine your payment acceptance strategies, understanding the differences between RDC check processing and ACH check conversion is crucial. Each method has its place, but they are not interchangeable, not in terms of compliance, not in terms of authorization, and certainly not in terms of the customer experience.
If your business values transparency and wants to reduce unnecessary friction or confusion, sticking with RDC might be the right path. Your customers will appreciate that their checks are processed as checks, complete with images and recognizable records on their bank statements.
In payments, trust is built on clarity. And in this case, how you process a check can make all the difference.
Learn more about iStream’s check services, including RDC, here.