David F. Kvederis retired from banking last year to turn talk into action.

For much of 26 years in the business, most recently at Wells Fargo & Co., Mr. Kvederis actively developed and promoted payment system innovations, particularly in corporate services and cash management.

But the banking industry's plodding in one area-automation of checks at the point of sale-left an opening that has given Mr. Kvederis new life as an entrepreneur.

He spent most of the last year building a San Francisco-based company, Bankserv, that enables retailers to convert check payments on the spot into electronic debits. Checks are stamped and handed back immediately at the checkout register, and a bank computer system or the automated clearing house network moves the money.

Bankserv runs the data center that tracks and verifies transactions and prevents bad checks from being passed.

"Everybody has been talking about truncation at the point of sale for years," Mr. Kvederis, 49, said recently. "Now they're able to do it."

Simple in concept and encouraged by the Federal Reserve Board, American Bankers Association, and National Automated Clearing House Association, the kind of check truncation that Bankserv champions got a boost last year when the clearing house group streamlined procedures for enrolling in a direct payment program.

A growing number of supermarkets and other check acceptors are installing devices that read magnetic-ink data off checks, allowing them to complete transactions paperlessly. Changing payment habits has become a matter of marketing and customer education, and it does not necessarily need a bank or Bankserv.

Elliott McEntee, who as president of the clearing house association supports paperless entries in principle, said storeowners like ACH-aided truncation because it provides a predictable cash flow without check- handling hassles.

Mr. McEntee said 3,000 retailers are participating in ACH check- conversion tests, which make check-writers comfortable because the payments still typically require at least a day to clear.

"It's not an instant debit, it's an electronic check," Mr. Kvederis said.

Mr. Kvederis, a former chairman of Mr. McEntee's association, wants to help banks seize this opportunity to satisfy retailers' desires for efficiency and fraud reduction, lest control of another banking specialty pass to nonbanks.

"Bankers have always said the last thing they have is the payments franchise," Mr. Kvederis said. "Well, guess what: Checks are the core of the payments franchise."

One thing that interested Mr. Kvederis in this business is that "banks have been underinvesting in product development, system development, and marketing."

He said $2.5 billion to $3 billion of industry revenue is at stake if companies such as TeleCheck Services, which is owned by First Data Corp., and Scan, a Deluxe Corp. subsidiary, move in on this part of banking's turf.

Besides holding on to processing revenues from supermarkets and other high-volume check depositors, Mr. Kvederis said, "If banks got into the check guarantee business, they could open up a whole new revenue stream and compete effectively" against what he calls the Big Four: TeleCheck, Scan, Equifax Inc., and National Processing Inc.

With just a couple of grocery stores, some Unix computers, and fewer than 20 employees, Bankserv is dwarfed by that crowd. And Mr. Kvederis' bank-friendly claims-he is offering to let banks "private label" his service to solidify their merchant relationships-will be challenged by those savvy competitors.

But in 14 years at Wells, six at Mellon Bank in Pittsburgh, and seven at Continental Bank in Chicago, Mr. Kvederis built a reputation as an intense and feisty commercial banker who never shied away from a competitive battle. He seems in his element as an entrepreneurial underdog.

He has financial backing from Maurice Gallagher and Timothy Flynn. The investors are best known for creating Westair, the regional air carrier that was sold to UAL Corp. and became United Express, and later for Valujet, the cut-rate airline now rebounding from tragedy.

Aware that he must gain the confidence of consumer-focused retailers while appealing to banking's persnickety risk managers, Mr. Kvederis stresses that Bankserv was not created on the cheap.

"Several hundred thousand dollars was invested in the software, which is not trivial," he said. And Bankserv has a "great data processing company in Fresno" poised to step in if the San Francisco data center becomes disabled.

Having completed two supermarket installations in the first half of this year, with three more due in July and August, the ex-banker has hit the road to invite prominent retail bankers to consider his approach. A few have taken serious looks. Banc One Corp. has entered into a nonexclusive partnership with Bankserv and is preparing to launch some pilots-they may go beyond store payments to include insurance and utility remittances.

"I think it's a concept right for the time," said Bob Dal Santo, senior vice president at Bank One in Springfield, Ill., and manager of one of the industry's premier automated clearing house operations.

"Dave has a good plan, and with his knowledge of the ACH system and its rules and technology, he brings a lot of expertise and credibility," Mr. Dal Santo said. "As consumer acceptance of electronic payments builds, we want to be ready for it, and we think (Bankserv) can help us."

His business plan may be bank-centric, but Mr. Kvederis had to prove the concept before any banks would sign on. So he made his first sales directly to two northern California stores, Food for Less and Piedmont Grocery.

The former, a 24-hour volume-discount operation, was a learning experience, he said, in everything from the training of clerks to the content of consumer brochures.

At Piedmont Grocery, a modest-size, community-based store in Oakland, the pace is more relaxed and clerks readily take time to assist patrons. Mr. McEntee of Nacha said this is the type of outlet where truncation will gain quicker acceptance, where customers can be walked through the steps of authorization and signup.

Customers also have recourse to a toll-free call center: "We get about nine calls per 1,000 first-time users," Mr. Kvederis said.

On a Saturday morning a few weeks after the Piedmont Bankserv system went live in May, a customer making his first truncated-check payment-one of several hundred Bankserv would process in an average day-found it so easy that he refused the offer of the explanatory brochure.

A few minutes later, an elderly woman came to the realization that she could hold on to the check and re-use it with each store visit. Each payment would still be identifiable on her bank statement.

Eyeing this scene, Mr. Kvederis articulated what he hopes hits bankers where it hurts: "Union Bank used to get those checks, but no more," he said of the San Francisco-based commercial bank. "The threat is real."

David Larson, president of Piedmont Grocery, said there were "still minor bugs," but the system was living up to expectations in consumer appeal and bad-check management.

"This is an adjustment for a lot of people," Mr. Larson said. "Suddenly they are told they are not going to be getting something"-the canceled check.

But many people seem to like the idea. Many count on the built-in float, which does not occur with on-line debit cards.

TeleCheck Services reported highly favorable responses in a survey of 600 pilot participants late last year.

"Check writers will need to go through the process only two or three times to feel very comfortable with it," said Randy Templeton, the Houston company's senior vice president of strategic marketing and development. Eight out of 10 said they were very or somewhat comfortable with electronic conversion, and "a surprising 16% said they would shop more at a merchant location that offered the new process."

To the retailer and consumer parts of the equation, Mr. Kvederis adds a mathematical reality that indicates the type of bank to which he is marketing.

"Let's say a bank has a 30% share of its retail banking market," Mr. Kvederis said. "About one-third of the checks will be written on that bank. Because it owns the data on those customers, it can guarantee those checks to the merchant without a check-cashing card or other such expense. That reduces fraud, and the merchant will pay to get its cash faster.

"A check guarantee company normally rates its portfolio on an actuarial basis. But a bank with a 30% share will only have to actuarially rate 70% of the checks, so it is ahead of the game."

Mr. Kvederis views it as one of those classic threats that can be turned on its head: "On one hand, banks can lose check volume because of companies like mine, TeleCheck, or Equifax. But there is also an opportunity to get check verification and guarantee revenues-an area they haven't addressed before."

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