Two Visa Inc. veterans are running a payment start-up that uses the automated clearing house network to offer online merchants low-cost transactions.
Noca Inc. said Monday that its Secure Check service lets consumers initiate debits from their bank accounts by entering their bank account details on participating merchants' Web sites.
Pankaj Gupta, Noca's founder and president, said his Mountain View, Calif., company charges merchants a processing fee of 0.25% of the purchase — far less than the interchange for credit and debit cards. He said the service also generates detailed online records for shoppers about their purchases.
"The merchants get almost-free processing. The consumer gets a detailed portal, where you get the entire transaction history, not just a description one-liner, but more so the entire contents of the shopping cart, which is not possible in … legacy networks," Mr. Gupta said in an interview Monday.
Before founding Noca, he was a chief network architect and director of network security for Visa. S. Randy Nott, Noca's chief architect and acting vice president of engineering, was a lead architect and engineer developing Internet applications at Visa.
Noca began offering the service at the end of last year. Mr. Gupta said his merchant clients currently number in the "double digits," and each has less than $10 million of annual revenue. Two companies with around $100 million have signed letters of intent, he said, and Noca is wooing a billion-dollar company.
A shopper who uses Secure Check is shown an image of a check, which the shopper fills out by copying the bank routing number and account number from an actual check. Once the purchase is complete, Noca e-mails the shopper a link to an online portal with details of the transaction.
Mr. Gupta is planning several enhancements to this portal. By the third quarter he wants to offer a reward program that lets merchants send offers to consumers.
Noca also plans to improve security by storing partial account numbers, so that consumers would not have to type a full account number for every transaction, he said, and it may eventually add a credit feature. He would not say when the two improvements might be available.
The Noca system lists Noca as the merchant when the purchase appears on a consumer's monthly statement.
Noca's service competes against several online alternative systems that allow payments from bank accounts and offer merchants lower fees than credit cards.
PayPal Inc., the payments subsidiary of eBay Inc., allows users to fund payments from a bank, card, or PayPal account.
Google Inc.'s Checkout is built to streamline card payments, but users can also use it to make payments from their checking accounts. Like Noca, Google lets users view detailed receipts online.
ModaSolutions Corp. of Ottawa also allows users to pay merchants through ACH debits. Its eBillMe service lets merchants bill customers and receive payments through banks' online bill-pay systems.
"There is a lot of merit to the idea of having a more secure, more reliable form of online payment," said Aaron McPherson, a research manager at Financial Insights Inc., a unit of International Data Group Inc., though Noca will face many challenges.
Bill Me Later, the instant online credit issuer that PayPal bought last year, was widely offered by merchants, but even at those sites it needed a promotional boost, he said. Amazon.com Inc. "had to offer a 10% discount for people to try it," because people were unfamiliar with the service.
(Amazon, which had an ownership stake in Bill Me Later before the PayPal acquisition, no longer offers Bill Me Later to its users.)
Credit card fraud has become a major issue to consumers, and Noca's message about security seems to play into that concern, but Mr. McPherson said there are also risks with ACH debits.
"The only reason no one hears about check [fraud] is because it's just so old," he said. "Absolutely, check fraud is still a big issue."
