August 04, 2003

After participating in a pilot program involving 14 other banks and 40 merchants, Bank of America has rolled out a new Visa service that helps merchants stay appraised of changes involving customers who have established recurring bill payment services.

Whether for convenience, necessity, or cardmember rewards, more and more consumers are opting to use credit and debit cards for recurring transactions. While customers can also use Bank of America's electronic bill payment service for recurring bills, the option to pay via credit card has been a valued one for many consumers. "We actually find them to be complementary services," says Dean Nolan, senior vice president of emerging payments for Bank of America, based in Charlotte, N.C. "A lot of customers are using both."

But every time someone's address, card number, or card expiration dates changed, his or her "card-on-file" bill payments tended to break down. Merchants facing that situation had unappealing choices. "One would be that the merchant would shut off the customer's service," says Nolan. "Another would be that the merchant would continue the service but send the customer a nasty letter."

Indeed, it would have taken a particularly perspicacious consumer to keep merchants appraised of card changes as they happened. "The customer at that point had to remember to contact the merchant and provide the merchant with their new expiration date or their new card number," says Nolan.

Visa's answer was to create a clearinghouse for updated information between the issuing banks -- who know exactly when a consumer has a new card -- and the merchants who want to maintain uninterrupted service with their customers. Banks can connect to the Visa Account Updater service through VisaNet's Internet-based Visa Direct Exchange.

The resulting process should be a smoother one for banks, cardholders and merchants alike, lowering operational costs all around. Furthermore, since cardholders at participating banks will no longer have to contact each merchant with whom they have recurring transactions, there's less of an opportunity for them to switch cards, observers say.