Telecheck Services Inc., a 35-year check processing veteran, is using its brand and experience to try to bring the ease and reliability of the paper check to the Internet.
On May 31 the Houston subsidiary of First Data Corp. formally introduced a service called Internet Check Acceptance, which lets people use information from their paper checks to pay online merchants right from their checking accounts.
Internet Check Acceptance is based on the automated clearing house network, which serves 20,000 financial institutions and last year cleared 6.2 billion payments worth $19 trillion.
Nacha, the electronic payments association, is encouraging ACH-based payment systems for the Internet. In April the clearing house group released a set of operating rules and best practices to "simultaneously enable the network for Internet payments and make sure it is done in a secure manner," said Julie Hedlund, senior director of electronic commerce at Nacha.
Many people "would prefer alternate payment options in order to have control over their spending, instead of adding online payments to their credit load," said Clayton Spitz, vice president of e-commerce at Telecheck. "We are encouraging people to use their checking accounts for online purchases."
Ms. Hedlund said it is easy for companies to develop payment systems based on automated clearing houses - all they need is a financial institution to clear the payments for them. Bank One Corp. processes ACH payments for Telecheck.
Though banks have not developed their own ACH-based Internet payment system, the New York Clearinghouse Association said it is seeking to form a consortium of banks that want to pursue a similar service for business-to-business electronic marketplaces.
Telecheck, which has signed up 100 merchants since its soft launch in April, is allying itself with bank merchant services to market the payment system to their merchant customers. Wachovia Merchant Services, which has signed an agreement for a co-marketing service, would be the system's first banking partner.
Telecheck also could team up with First Data's 10 bank alliance partners, or its own 1,800 smaller bank partners, to resell the service.
Internet Check Acceptance, which is free for consumers, does not require them to open a new account or register a user name, as many credit card-based online payment systems do. People simply enter the payment screen of a Telecheck-registered merchant and key in standard information - the check number, MICR number, and driver's license number.
The information is returned to Telecheck through First Data's SurePay secure gateway. Telecheck uses its database to validate the information and sends an approval or denial to the merchant in real time. The merchant, who is charged a fee similar to that for a credit card interchange, is paid on the second business day - faster than if a customer used a paper check.
Telecheck processed 3.1 billion transactions last year. When a check writer comes through the system, "there is an 80% chance that we have seen them before," Mr. Spitz said.
