Aiming at the small merchants that it says banks have largely ignored, the transaction processor Heartland Payment Systems Inc. has started offering a remote capture service that can route check deposits to any bank.
The service inserts a new player into what has traditionally been a direct relationship between businesses and their banks, and observers warned that this model could disintermediate financial companies. However, Heartland executives said merchants already use third-party merchant acquirers for card transactions, and its Heartland Express Funds service, which it calls a "bank-neutral remote deposit capture," simply extends that model to cover checks.
"Remote deposit capture is not in its infancy anymore," said Sanford C. Brown, the Princeton, N.J., processor's chief sales officer. "Big merchants have been courted by their banks for some time through their cash management marketing efforts, but the small and midsize merchants have gone largely untouched."
According to Tony Capucille, Heartland's director of check services, the company is targeting several specific industries: medical billing, property management, law offices, and business-to-business transactions.
"Checks are not decreasing as fast as they expected," he said.
Heartland executives estimate that 80% to 90% of the potential customer base for remote capture services is going unserved, and that processors, which work directly with merchants, are well positioned to offer the service.
Though he said that some processors are using a similar model regionally, Mr. Brown said that "as far as we know, Heartland is the first payment processor, on a nationwide basis, to offer this," Mr. Brown said. It has 1,600 sales people nationwide pushing the new service.
Heartland is aiming primarily at its 155,000 small and midsize customers, which include restaurants, retailers, inns, car repair shops, convenience stores, and liquor stores. It handles one in eight card transactions at restaurants nationwide, even though it does not serve the major restaurant chains, Mr. Brown said.
The service lets merchants convert their checks to images that are sent to Heartland, which forwards them to banks for settlement.
Heartland offers a premium service that provides next-day credit on checks that merchants send to Heartland before 6 p.m., sending automated clearing house credits to the merchant's bank to prefund merchants' accounts while the checks clear.
John Leekley, the founder and chief executive of RemoteDepositCapture LLC, an Atlanta market watcher, said that merchants would like the idea of using a check deposit service offered by their card processor.
"Dealing with one bank, one payments provider, makes it much easier and more convenient for the merchants," Mr. Leekley said.
But the emergence of nonbank processors also could be a threat to bankers, he said. "Banks need to be aware that they risk being disintermediated in the payment processing business."
Mr. Capucille said his company is working on later cutoff times, and waives the premium processing fees for next-day availability for its card or payroll processing customers.
The new service also "benefits the depository bank," he said. "They're getting the funds back faster than they would if the processed those transactions themselves."
Mr. Brown said Heartland began testing the service in May and went live with it early last month but could not announce its availability then because the company was in a quiet period for a secondary stock offering that it completed in mid-September.
