MILAN, Ill. -- Eagle Food Centers here will roll out chainwide a check authorization system that reduced the number of bad checks by 50% at 22 stores in a pilot program.
Eagle Food will bring 31 Chicago-area stores on-line to the check authorization network in December, and all remaining stores in January 1995, a company official said.
All checklanes will be equipped with "microreaders" for scanning checks, along with new software applications for each store mainframe. Though the rollout represents a substantial investment, Eagle Food said the payback in a faster and more centralized check approval system, and cost savings attributed to a reduction in check fraud, are well worth it.
"Sixty percent of our business is checks. You can't get away from that," said Richard D. Wille, loss prevention manager. "But you can reduce and control your expense by having a centralized check process. You need to make bad checks a manageable part of your expenses in the same way you manage cash shortages [and] shrink -- as a percent factor relative to your sales."
Eagle Food launched a pilot of the check authorization network at 22 Iowa stores in August. The stores were chosen because their relative proximity to each other, and distance from other Eagle stores, made them an almost self-contained market.
"Those 22 stores are in the Quad Cities area in Iowa, and we felt there was no crossover shopping outside of these stores," he said. "The closest store to them is in Kewanee [Ill.], 40 to 50 miles away. So we can control the market as far as all 22 stores having the same information."
Fifteen days after the test began, the pilot stores saw a 31% reduction in returned checks, Wille said. The next month saw a further reduction to 51%. "We centralized our collection process, saved time in the stores, provided better service to the customers and reduced the number of bad checks by 50%," he added.
The network, called SCAN for Shared Check Authorization Network, contains bad check files gathered from area retailers, according to Electronic Transaction Co., Seattle, which manages the network.
Another benefit of the system is reduced confrontations between employees and customers writing checks on insufficient funds. "We have seen customers come in, try to write a check and have a negative entry in the system. But they don't question it, they just pay with a credit card or cash," Wille said.
"Before you might have had some opportunity for hassle from the customer or a confrontation, but you don't have it any more. You just say, 'We're a merchant on this system and here's a number you can call to find out where you have an outstanding check.' It removes that confrontation from the store."
Checks are approved when a cashier uses a register microreader to scan the check account number. The number is sent to a file and compared to a list of bad checks sent in by all participating network members. If the number doesn't match any in the list, the check is approved.
Wille said Eagle Food keeps the data base updated every 24 hours to account for newly returned checks and debtors who have paid off outstanding checks. "We'll update it with new information and relieve from the system anybody who pays their checks," he added.