Visa to buy stake in check presentment firm.

Visa U.S.A. and Payment Solutions Network Inc. have announced that their directors have approved an agreement in principle for Visa to acquire an equity share in PSN, the leading electronic check presentment company.

The agreement would let Visa offer electronic check presentment services to its member financial institutions.

Details of the agreement were not disclosed.

The move into electronic check presentment -- which involves sending check information between participating banks in advance of the paper items -- represents a significant step in Visa's evolution, said officials.

The company, which operates VisaNet, the largest electronic consumer payment network in the world, will be able to leverage the network to offer check exchange services "with minimum development time and cost," said Carl Pascarella, president of Visa U.S.A. "Our technological infrastructure allows Visa to quickly respond to members with viable, cost-effective solutions to their business needs."

The agreement will also enable Visa to add another option to its variety of noncash payment processing offerings, which include credit card, debit card, remote banking, automated teller machine, and automated clearing house.

"In opening our network to electronic check exchange, Visa has an important new set of electronic transactions that further extends our consumer payment processing services beyond card-based products," said William L. Chenevich, group executive vice president, Visa Payment Systems.

For Delaware-based Payment Solutions Network, the deal has several advantages, said J.D. "Denny" Carreker, secretary to the board and part owner of the company.

The company will experience significant expansion and functionality and gain greater visibility in the market, he said, adding that PSN will be able to leverage Visa's "significant penetration from a data communications standpoint."

Visa's data communication network is set up so that all lines come into a host switch at which various applications can be performed, he explained. As a result, Payment Solutions Network will be able to offer such additional services as net settlement, and data base services that enable retailers to reduce check fraud at the point-of-sale.

Industry experts agree that electronic check presentment is critical to the efficient and cost-effective processing of check transactions. By electronically sending check information before the actual check arrives, accounts can be debited earlier. This helps banks reduce the risk of fraud, through the early detection of bad checks.

Electronic check presentment is also catching on because of the high cost of paper check processing.

Each year, approximately 60 billion checks are written in the United States, a number that is estimated to be growing at a rate of 2% a year.

With the cost of traditional paper processing of checks ranging between $6 billion and $8 billion, electronic check presentment is gaining momentum. In 1994, approximately 300 million checks will be exchanged electronically in this country.

Payment Solutions Network is the only nationwide company that offers both local and national electronic presentment services for banks. The company is owned by Banc One Corp., BankAmerica Corp., Bank of Boston Corp., Barnett Banks Inc., Boatmen's Bancshares Inc., First Interstate Bancorp, First Tennessee National Corp., First Union Corp., and NationsBank Corp. J.D. Carreker and Associates, Inc., a Dallas-based technology and consulting firm, manages Payment Solutions Network, provides electronic presentment technology, and is also an equity partner.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER