After 20 years as his own boss, check-guarantee entrepreneur John D. Chaney has exchanged independence to run a company twice the size of his former business.

Mr. Chaney, 42, used to run the biggest franchise of TeleCheck, which provides payment services such as check guarantee and check verification to retailers and new-account screening for banks. Known as Payment Services Co.-U.S. of Houston, Mr. Chaney's operation in the South and Midwest was responsible for more than 40% of TeleCheck's business.

He sold the company in late July to First Financial Management Corp. of Atlanta, a leading processor of credit card transactions for retailers. In a move to consolidate the check-services business, First Financial also bought the franchiser TeleCheck Services Inc., which controlled another 40% of the overall TeleCheck market, from McDonnell Douglas Corp. First Financial paid $159 million for the two companies.

Now Mr. Chaney is in charge of combining the operations of TeleCheck and Payment Services and of charting the business' course under First Financial.

"A national retailer would have had trouble dealing with TeleCheck" because the organizations were separate, Mr. Chaney said. The operations "had to be consolidated under one database system and one management," and First Financial stepped in to make that possible.

"I had been trying to figure out a financing package to consolidate the TeleCheck system," Mr. Chaney added. "But it's much harder to put together a leveraged buyout in the 1990s than it was in the 1980s."

The new TeleCheck has about 31% of the U.S. check guarantee market. The industry leader is Telecredit Inc., a subsidiary of Equifax, the Atlanta-based credit reporting bureau.

How the System Works

About 100,000 retailers and several thousand banks use TeleCheck. The operation maintains an extensive data base of check bouncers. If a consumer who presents a check is not listed, the company approves the check. If it is guaranteed, the entity accepting the check is insured against loss. TeleCheck will also issue an alert if it detects a kiting scheme.

Among the projects Mr. Chaney is working on is to capture the magnetic-ink information on checks at the point of sale, speeding authorizations. About 4,000 retailing locations have installed check readers.

Later, the company wants to test check truncation, in which the retailer would hold the check and transmit its data electronically.

In 1976, using money from the sale of a data processing company his father had founded, Mr. Chaney bought his first TeleCheck franchise, in Houston.

Rapid Expansion

The company grew about 20% a year, partly through acquisitions.

From 1976 to 1987, Mr. Chaney bought TeleCheck operations in the rest of Texas and in Oklahoma, Arkansas, New Mexico, and Hawaii. In 1989 he doubled the size of the company, buying a seven-state business in the Southeast from Barnett Banks Inc. of Florida and, separately, a Los Angeles operation.

"John is a driven entrepreneur with an encyclopedic knowledge of his industry," said Jeff Chambers, a general partner with TA Associates, a venture capital firm with offices in Boston and Palo Alto, Calif. TA put up about $80 million in 1989 to fund Mr. Chaney's acquisitions.

Mr. Chaney is credited with setting up an achievement-oriented corporate culture at TeleCheck, offering sales incentives and performance awards.

"He has set the standard," said Calvin Williams, a senior vice president in commercial lending at Texas Commerce Bank and a friend of Mr. Chaney's from their days at Principia College in Elsah, Ill. "He's bright, ambitious, and creative. He's built a strong team of managers that really share his vision of TeleCheck."

Computer Background Helped

After receiving a bachelor's degree in business administration and computer science in 1972, Mr. Chaney joined his father's Houston-based data processing company. Four years later, when the older man died, his son sold the company, which had quadrupled in size.

Mr. Chaney used the computer services experience to build the technology-intensive TeleCheck business. "We move an electronic transaction from a retailer to us in less than a second," Mr. Chaney said. "The cost of a transaction has been cut by a factor of 50% to 80% in the last five to eight years because of technology."

The consolidation of the two TeleCheck companies is expected to bring further savings, but Mr. Chaney declined to say how much.

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