STORES Magazine - February 2008 - (Page 40) NUTS AND BOLTS / CREDIT New Option for Web Payments I f at first you don’t succeed, try again. That’s the attitude that seems to have been adopted by NACHA – the Electronic Payments Association. The association, which oversees the ACH payment network, has a new proposition for offloading to the ACH at least some of the card payments consumers now make to online merchants. The program, Secure Vault Payments (SVP), creates a payment link between online merchants and customers by way of online banking platforms at customer financial institutions. George Throckmorton, a senior director at NACHA, expects a pilot of SVP with a select group of businesses to be in full swing by summer. Merchants will pay interchange, but Throckmorton insists SVP is priced to undercut credit card pricing and will eliminate chargebacks, the principal bane of card acceptance. “It’s the most secure option because the [customer’s] bank does the authentication and authorization,” Throckmorton says. Some analysts who have examined NACHA’s pricing model say the savings to merchants are modest. At a cost of about 1.52 percent per transaction, “it’s still quite high relative to checks or [other] ACH transactions,” says Adil Moussa, an analyst with Aite Group. SVP is the latest salvo in NACHA’s push for a piece of the Internet payments pie, which has been dominated by credit cards. A recent report by Javelin Research & Strategy estimates that 30 percent of Americans will be using alternatives to cards for online payments by 2012. MICR reading devices for check authorizations. There’s no check imaging required: “We don’t need imaging terminals at the point of sale to give merchants the benefit of electronics,” says TeleCheck general manager Mark Wallin. Natural fit for retailers ECA, TeleCheck’s POP-based check conversion product, is in place at approximately 180,000 merchant locations – more than half of the retail locations served by TeleCheck. Wallin describes POP as “a natural fit” for retailers. “A huge part of the value proposition is cost efficiencies,” he says. “With this, once you hand the check back at the point of sale, you’re out of the check game.” MagTek and other leading terminal manufacturers offer countertop devices that capture check images as well as MICR line information and integrate with major POS systems. Although the number of checks accepted at company storefronts is declining every year while credit and signature debit card payments grow, H&R Block isn’t inclined to discourage customer check usage. “The interchange we pay on credit and debit cards is much higher than the cost of processing [electronic] checks,” Hicks says. A recent report by the Federal Reserve reveals that Americans wrote 33 billion checks in 2006; about three billion of those checks were converted to ACH payments, and a significant number were cleared via electronic check exchanges. Overall check usage has been falling by an average of 6.4 percent annually since 2003, according to the Fed. Eliminate most paper Nancy Atkinson, a senior analyst with Boston-based Aite Group, expects ACH check conversion, along with image check-clearing initiatives, to drive most of the paper out of check clearing by 2012, when just one-quarter of an estimated 25 billion checks will clear as paper documents. Heartland Payment Systems last year introduced a service that combines ACH check conversion with electronic check clearing to provide a “bank neutral” approach to remote check deposits. “We can collect and give merchants their money just as fast as a local bank,” says Tony Capucille, director of check services for Heartland. “It works just like the card model.” Countertop devices capture check images as well as integrate with major POS systems. Several other merchant and check services companies have similarly positioned services, including Nova Information Services, Certegy Check Services and CrossCheck. Bob Meara, a senior analyst at Celent, believes others will follow suit. “We expect that growth in electronic checks as a percentage of POS transactions will continue in a meaningful way, as we see more adoption among large and mid-sized reStORES tailers,” he says. Patricia A. Murphy, a Maryland-based writer specializing in payments and technology, is president of The Takoma Group (www.takomagroup.com). WWW.STORES.ORG 40 STORES / FEBRUARY 2008 http://www.takomagroup.com http://WWW.STORES.ORG
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