SafeCheck, which authorizes paper checks at the point of sale by comparing them to the check-writer's deposit account balance, says that five of its 11 bank owners are now using its service and that the other six will be using it by next year.
BB&T Corp. was the first to sign up for SafeCheck's service, which can also convert checks to electronic debits at the point of sale. ABN Amro, Wachovia Corp., Union Bank of California, and Union Planters Corp. are also currently using it.
Four other bank owners - Bank of America Corp., Citigroup Inc., FleetBoston Financial Corp., and U.S. Bancorp - will start using the service soon, SafeCheck said. J.P. Morgan Chase & Co. and Wells Fargo & Co. will start using it next year.
"We're hopeful that the other banks that are not currently SafeCheck members will become SafeCheck members," said Anne O'Toole, its executive director.
The New York-based SafeCheck now processes about 150,000 transactions a month for about 2,000 merchants in the Southeast, she said. "We hope to have the top five check processors on board this year."
SafeCheck is a subsidiary of the bank-owned Small Value Payments Co., which is administered by the New York Clearing House Association LLC. First Data Corp.'s NYCE subsidiary, Concord EFS' Star subsidiary, and Pulse EFT Association also have ownership stakes in SVPCo.
"Banks share a common interest in preserving their treasury services business by providing check conversion capabilities," said Carol Malicki, a senior vice president at Wachovia and the chairwoman of SafeCheck. "They share payment system expertise, real-time access to checking account balances, and the use of the existing EFT network infrastructure.
"Using SafeCheck assures that participating banks will benefit from the significant revenue opportunity in check conversions, an opportunity growing at over 6% a month," she said.
Ms. O'Toole described SafeCheck's check authorization service as "an enabler to risk tools that check processors use today."
While merchants like to accept checks because customers like to write them, merchants lose about $11.5 billion a year because of check fraud, and only 38% of the 18 billion checks written at the point of sale last year were checked against deposit balances, according to SafeCheck.
The company works with check verification companies and electronic check processors to provide merchants with instant verification that the customer's account is open and contains sufficient funds to cover the check. SafeCheck can immediately debit those funds through the ATM networks that own it, so merchants set up to handle check conversion can give their customers cancelled checks at the point of sale.
On June 10, SafeCheck announced partnerships with two check processors, Citadel Commerce Corp. and SyTec Inc., which will begin offering point of sale check verification and electronic check conversion in conjunction with SafeCheck this month.
"We have dealt with check alternatives," said Craig Tims, the president of SyTec, of Orlando. "We've always recognized that checks are a major player at the point of sale, and we've always recognized that merchants have always wanted the ability to verify the availability of the funds of their customers. It hasn't been possible until now. For the first time ever, we can deliver what the merchants wanted all along."
SafeCheck charges between 50 cents and a dollar per transaction, so it is less expensive for merchants than credit cards fees or other forms of check guarantee, Mr. Tims said. One large department store customer, upon learning of the service, asked, "'How soon can you install it?' " he said.
"Most check verification, if it is done at all, is accomplished using outdated information," said Michael Meeks, the president of Citadel Commerce, of Vancouver. "Settling a check transaction can take several days through ACH or current check clearing systems, as opposed to a matter of hours with SafeCheck.
"SafeCheck is the only service that allows processors to clear checks instantly and provide guaranteed funds," he said.
