The Pulse EFT Association, the largest regional automated teller machine network in the Southwest, has formed a subsidiary dedicated to preventing check fraud against member institutions.
The for-profit unit, Pulse Chek Service Corp., will monitor a checking account data base that eventually will contain information on the majority of checks written in the 11th Federal Reserve District.
"Pulse Chek was designed to provide notification of the potential return of deposited checks prior to the beginning of the next business day," said Stan Paur, president of the Pulse association, which is based in Houston.
Almost 20,000 Outlets
The Pulse network comprises more than 7,500 automated teller machines and 12,000 point-of-sale terminals.
"This advance notification provides institutions with the opportunity to take the appropriate action to avoid the release of uncollected funds," Mr. Paur said.
He said the Pulse Chek service, which will be available in the fall, is based on software from Star System Inc.
San Diego-based Star - by some measures the largest regional electronic banking network in the nation -has been running an antifraud program known as Star Chek in the West since 1992.
A Growing Network
Star Chek handles more than 23 million checks a day from 10 of the largest financial institutions in the West.
Twenty more have committed to Star Chek, a spokeswoman said.
Bankers involved in the Star Chek program declined to make their fraud reduction numbers public.
Nevertheless, Mr. Paur said that, based on his knowledge of the Star Chek system, there is "no doubt that through participation in Pulse Chek, financial institutions can reduce check losses."
Joint Access Due Jan. 1
Because Star Check and Pulse Chek will have similar operating rules and technical specifications, the two systems are expected to be connected by next Jan. 1.
This should improve the effectiveness of both programs by enabling participants to examine the authenticity of checks drawn on institutions outside their local regional network, officials said.
In both Star Chek and Pulse Chek, the central data base houses account numbers and account status codes that are supplied daily by participating institutions.
Participants compare deposited checks against the data base to determine the likelihood of fraud.
Experts said the systems can be particularly effective in heading off one of the biggest components of check fraud in the United States: checks written against closed accounts.
Balances Aren't Accessible
Proprietary account information such as account balances, is not accessible through the system.
According to Thomas Vicknair, the Texas Commerce Bancshares executive who is chairman of Pulse Chek, most of Pulse's major members have expressed interest in participating.
Six banks, which are also the system's first participants, will have an ownership position in Pulse Chek.
They are Bank of America, Texas; Bank One, Texas; Frost National Bank; First Interstate Bank of Texas; NationsBank of Texas; and Texas Commerce Bank, a subsidiary of Chemical Banking Corp.
Four-Member Executive Team
In addition to Mr. Vicknair, Pulse Chek is managed by three other executives: Mr. Paur is president, while Ron Patterson, an executive at Bank One, Texas, and John R. Glover of Nationsbank of Texas are vice chairmen.
In explaining the show of interest among the network's larger members, Mr. Vicknair pointed out that, in addition to reducing fraud, Pulse Chek can produce income for financial institutions that contribute account information to the data base.
"[Pulse Chek] generates fee income through interchange and transaction fees from other financial institutions," he said.
If Pulse decides to sell the fraud prevention services to retail merchants and check verification companies, banks may also claim that additional fee income.
