Concord EFS Inc., effectively shut out of the check electronification market after Visa U.S.A. bought its vendor, is planning a big return using the muscle of its soon-to-be parent, First Data Corp.
Until last year Concord's Star Systems, as well as two other electronic funds transfer networks, NYCE and Pulse, used SafeCheck LLC to offer merchants check conversion at the point of sale. That service turns check payments into electronic or "check debit" transactions and settles them immediately for a relatively low, flat interchange fee.
Visa, of San Francisco, acquired SafeCheck in July and quickly folded it into another service, making SafeCheck unavailable to networks like Star.
But Star says it is reviving its conversion business. On Thursday it announced plans to ramp up its Check Direct unit by offering services it will provide through various partners, including First Data's TeleCheck International Inc., the largest provider of check authorization and conversion to U.S. retailers.
The relaunch of the Star service appears timed to take early advantage of its sale. Stockholders of Concord, of Memphis, will vote next week on whether to permit First Data, of Denver, to buy it. Star expects to introduce its new check service in three to four weeks.
Barbara Span, a Star spokeswoman, said it has been developing check debit technology since 1992, despite setbacks like the SafeCheck acquisition. Just before it was shut down, SafeCheck's peak monthly volume was 150,000 transactions, she said.
Star hopes to make its new service bigger than its SafeCheck-powered service. SafeCheck had only four acquirers, Star will launch with eight, she said.
Ronald V. Congemi, Star's president, said in a press release, "The advances we've made in check electronification mean that the future for the paper check is a more secure transaction, because the check can be a truly electronic transaction."
In addition to TeleCheck, of Houston, Star's partners on the service will include BillMatrix Co., which enables bill payments over the telephone and Internet; ACH Direct Inc., an automated clearing house processor; First Data's E Commerce Group; Electronic Clearing House Inc.; FEDChex LLC; LML Payment Systems Inc.; and the software company Paragon Systems LLC.
Visa, taking advantage of the uncertainty surrounding Star's fate, has wrested some major bank members away from Star (like U.S. Bancorp and Wachovia Corp.) throughout the past year and signed them up for the PIN-based debit network Interlink.
Analysts say Concord's decision to ramp up its check service is one way to win back volume for Star.
"What you're seeing is the competition really heating up between Visa and Star for the debit market," said Avivah Litan, the vice president of financial services for the Stamford, Conn., consulting firm Gartner Inc.
While Visa has been stealing banks from Star, Ms. Litan said, Star has been going directly to the merchants to market its offerings. "The merchants are driving the markets much more than they used to" before the Wal-Mart settlements.
Dante Terrana, the director of business development for Visa's POS Check Service, said it has been offering check debit, or check conversion, for about two years over the VisaNet network. SafeCheck was rolled into POS Check Service, he said.
A number of sources said Visa bought SafeCheck to shut Star and the other networks out of the check debit market.
But Mr. Terrana said the consolidation occurred because many of the SafeCheck-issuing banks also were in Visa's program. "The institutions that were in the SafeCheck program were having to support two" programs, he said. "It was in their best interest to operate one program."
He also said the majority of SafeCheck's volume involved check verification, which Visa offers only in conjunction with services like check debiting, so Visa could not use much of SafeCheck's services.
