Visa U.S.A. says that its effort to encourage banks and merchants to use check conversion is beginning to snowball, with more banks and merchants signing up for the card association's authorization service.
Retailers can use the Visa POS Check Service, which was introduced in pilot form in March 2001 and has since been rolled out more substantially, to confirm at the point of sale that a customer's deposit account has enough money to cover the check. Once that is confirmed, the retailer can convert the check to an automated clearing house transfer and return the cancelled paper check to the customer.
So far Visa has signed up 200 merchants in 33 states, plus 17 banks. The service has facilitated $21 million of transactions and is "receiving significant interest from banks," said Dante Tarrana, the director of the Visa service.
With more banks signing up, Visa expects the service to have online access to 25% of all demand deposit accounts in the United States within the next 12 months and to add another 25% in each of the following three years, Mr. Tarrana said.
Merchants no longer wonder whether to offer check conversion, but instead ponder which service to offer and which vendors to use, he said.
Visa POS Check competes with the automated clearing house, First Data Corp.'s Telecheck subsidiary, and Safecheck, a point of sale check-to-debit service owned by a consortium of 11 banks and three electronic funds transfer networks.
"The key differentiator is that the Visa service attempts to authorize the transaction against the consumer's actual DDA at the time of the transaction," Mr. Tarrana said. "Most of our competitors rely on negative databases."
Visa offers three levels of check service: A conversion-only service that determines if the check is can be converted to an electronic item; a "conversion with verification" service that determines the probability of the check having sufficient funds; and the highest level of service, which guarantees that the merchant will receive the funds.
Checks drawn against participating banks - which include BB&T, Bank of America, and U.S. Bank - are checked directly against the demand deposit account and settled through VisaNet. Checks drawn against nonparticipating banks are verified through third-party databases and converted to ACH items.
Visa said this month that it had signed up Columbia Bank of Tacoma, Wash., for the service. Other customers include First National Bank of Omaha's First of Omaha Merchant Processing and Provident Financial Group's Provident Bank.
Woody Tyner, a payments strategist at BB&T Corp., said that the Visa service is working fine. "We are getting about a thousand transactions" a month, primarily from the retailer Books-A-Million Inc. "It's not a whole lot, though, yet."
BB&T also uses Safecheck and the ACH for check conversion. "We don't have a preference," because each of the services has advantages and disadvantages, Mr. Tyner said. "Each has a got a niche."
Visa POS Check and Safecheck tend to be more expensive than the ACH or Telecheck, which rely on negative databases, he said. "I expect merchants will want to use Visa or Safecheck when it's Saturday night and the customer has a got a large-screen TV on the back of his truck that costs $2,000. For a $35 transaction, he might not want to use it, but again, it all depends on the merchant."
Merchants pay banks a fee to use the Visa service, and Mr. Tyner said he expects that more banks will sign up because of the revenue opportunity, and because the service is fairly simple to implement.
First of Omaha offers Visa POS Check to merchants under the brand name CompletePay.
"We have had tremendous success" with it, said Susan Rue, the CompletePay product manager. "This enables merchants to have one settlement for both their credit card and check transactions. A bank becomes a one-stop payment processor."
