MasterCard Adds Service That Flags Bad Checks

MasterCard International has added check authorization to its menu of merchant point-of-sale services.

The New York-based credit card company has contracted with Shared Check Authorization Network, or Scan, to allow merchants to access Scan's data base on bad check writers via their point-of-sale terminals.

Scan, developed by the Electronic Transaction Corp., which is based in Seattle, maintains one of the largest data bases on bad check information in the country.

MasterCard decided to add check authorization to its point-of-sale program because of an upsurge of losses due to bad checks, said Sharon Cline, vice president of marketing.

Scan was previously available only to merchants that contributed information on bad check writers to its data bases, but has recently opened up the service to other retailers that have relationships with bank card companies such as MasterCard.

338 Million Checks

Scan authorized over 338 million checks last year at an estimated value of $22 billion, which represented 41% of all checks authorized at the point of sale in the United States.

"We've had a lot of interest from merchants that are concerned about taking bad checks," said Ms. Cline. "They also want to use one terminal to access check authorization information."

Merchants can use existing dial-up authorization terminals and electronic cash registers to access Scan's negative file, which is compiled by national retailers such as Sears that contribute information on bad checks daily.

Twelve thousand updates to the negative file are processed each day.

Per-Charge Transaction Fee

Merchants who sign up for the Scan service key in the customer's checking account number of driver's license into the point-of-sale terminal and are charged for each transaction.

MasterCard bills the merchant's bank for Scan usage, and the bank then bills the merchant.

Scan differs from other check authorization services such as Telecheck in that it is not a guarantee service, where the merchant pays a percentage of each sale paid for by check to the service. If the check is bad, the service will cover the check.

Visa currently offers merchants a check guarantee service through Telecheck. A spokeswoman for the San Matteo, Calif.-based credit card company said that Visa is looking at adding Scan to its point-of-sale offerings.

Ms. Cline said MasterCard preferred to provide an information service rather than a guarantee service because it will be less costly to the merchants and because of the high quality of Scan's bad check data.

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