Visa U.S.A. has announced that Bank of America, SouthTrust Bank and State Employees Credit Union will launch the Visa check acceptance system, called Visa POS Check Service, which could significantly reduce paper check handling and fraud costs incurred by Visa financial institutions and their merchant customers.
Other Visa financial institutions that have introduced the service include U.S. Bank, First National Merchant Solutions (formerly First of Omaha Merchant Processing), Provident Bank and BB&T.
The Visa check acceptance solution enables Bank of America and its merchant customers to streamline the check-handling process in a simple, integrated and secure way, according to Cory Gaines, senior vice president at Bank of America.
For SouthTrust, the Visa check service enhances the payment processing options it provides to its merchant customers. "This service allows our clients to process all transactions in a timely and cost effective manner," said Jay Silvestain, senior vice president of the BankCard Center, SouthTrust Bank.
Personal checks continue to be the most popular form of payment, but a costly one. Paper checks are used as payment for approximately half of all personal spending. Annually, POS paper check handling costs banks billions while merchants incur an estimated $23 billion in check handling and fraud costs, averaging more than one dollar for every check written at the point-of-sale.
The POS Check Service provides direct online access to consumer demand deposit accounts for authorization, similar to credit and debit card transactions. Other existing check acceptance systems typically rely on a variety of historical databases or negative files to electronically process check transactions. Powered by the VisaNet transaction processing system, the POS Check Service can potentially bridge to five million merchants and reach 90 percent of U.S. demand deposit accounts.
The traditional check handling process is paper-driven, with each check being handled an average of twelve separate times before settlement. With the POS Check Service, checks presented at merchant locations are scanned through a check reader at the point-of-sale, which captures the account, check and bank routing numbers along with the amount of the purchase. This information is then routed either to participating banks for authorization of the transaction amount or to third-party authorizing agents for authorization of transaction amounts for checks drawn on non-participating financial institutions. Once authorization is obtained, the customer is required to sign a separate sales receipt authorizing the conversion of the check transaction to an electronic transaction. The merchant then voids the paper check and returns it to the customer along with his or her signed sales receipt.
The POS Check Service also provides merchants with options for verifying and guaranteeing point-of-sale transactions. Under the verification option, the transaction is accepted or declined based on the probability that it will be paid. The verification option reduces the risk of loss to the merchant. Under the guarantee option, a POS Check guarantor purchases the transaction from the merchant at a discount, further reducing the risk of loss to the merchant. Again, the guarantor accepts or declines the transaction based on the probability that it will be paid.
For consumers, the POS Check Service will expedite the checkout process, increase their ability to use their out-of-state checks at the point-of-sale and provide increased transaction details that will be included on their monthly bank statements.