Thursday December 9, 6:02 am Eastern Time
Company Press Release
Visa U.S.A. to Pilot Point-of-Sale Check Electronification
Bank-branded Service Would Eliminate the Costly Handling and Settlement of Paper Checks
FOSTER CITY, Calif.--(BUSINESS WIRE)--Dec. 9, 1999--Visa U.S.A., the country's largest payment system, has started pilots of an electronic check-processing service, leveraging its vast network to route and process electronic-check transactions for its member financial institutions and merchants.
The check-processing technology could eventually eliminate billions of dollars in annual paper check-handling costs incurred by banks and merchants.
The pilots will evaluate the in-store performance of technology that processes check payments electronically at the point of sale -- mirroring how credit- and debit-card transactions are now processed. Visa's authorization network already reaches four million U.S. merchant locations and 90% of the country's demand-deposit accounts.
With the service, a check written at the point of sale is scanned through a check reader to create an electronic transaction. Then, instead of traversing the complex clearing and settlement process, the paper check is immediately returned to the customer, along with a printed receipt.
The vital information from that check -- including the customer's bank, checking account number and amount of the transaction -- is captured electronically and sent through Visa's processing network and the automated clearinghouse system. The transaction is eventually cleared and settled in one to two days, when the amount of the transaction is transferred from the consumer's checking account to the merchant's bank account.
Midwest Payment Systems, a division of Fifth Third Bank, and payment processors Rocky Mountain Retail Systems and Kincaid Technologies are testing the service at the Remkes grocery store chain at stores in Ohio and Kentucky. Vital Processing Services© and U.S. Bank are developing several pilots to be released this year at retail merchant locations in the Midwest.
Other Visa member financial institutions are expected to start tests of their own in early 2000.
In 1998, some 18 billion checks were written at the point of sale in the United States, and merchant check-handling and fraud costs totaled a staggering $22 billion -- more than $1 for every check written. The bank-handling costs for processing paper checks written at the point of sale added another $6 billion in costs to the nation's financial system, according to some industry estimates.
Traditionally, check payments at the point of sale are processed manually, and billions of paper checks literally crisscross the country nightly as part of the complex check clearing and settlement process. On average, a single check is touched 12 separate times before the consumer's checking account is debited and the merchant's account is credited.
In the tests, Visa will upgrade its network, enabling the transmission of electronic checks to banks for posting to consumer demand-deposit accounts. This will enable banks to authorize and guarantee check payments, a market traditionally dominated by non-bank companies.
Checks now account for about 50.5% of U.S. personal consumption expenditures, down from 56% in 1993. Plastic payment cards, including debit cards, account for 26.5%, while cash and other forms of payment, including money orders and travelers' checks, account for some 23% of spending.
Visa U.S.A. is the leading payment brand and the largest payment system in the United States, with more volume than all other major payment cards combined. Visa plays a pivotal role in advancing new payment products and technologies to benefit its member financial institutions and their cardholders.
There are more than 330 million Visa U.S.A. credit, commercial and check cards, which generate more than $660 billion in annual transaction volume. Visa-branded cards are accepted at over 18 million locations worldwide, including some 530,000 ATMs in the Visa/PLUS Global ATM Network. Visa's Internet address is www.visa.com.
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