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April 2000


The Check Is In The (E-) Mail: Web-Based Payment Solutions


With an increasing number of online stores, mail-order catalogs and home shopping networks, shopping at home has reached explosive levels. Consumers spent over $13 billion dollars online last year alone. Experts project worldwide e-commerce sales to reach up to 3.2 trillion dollars by the year 2003. These figures are expected to grow at an exponential rate. Even bills can be paid directly over the PC or the telephone, reducing the estimated 40 hours spent by the average American household paying bills each year.

Keeping with the pace of this fast, direct way to shop, credit cards have become the tools of choice for making at-home payments and purchases, offering convenience, speed and security. In fact, for merchants, verifying a credit card number is essentially the only way they can accept a payment directly over the Internet or the telephone. Unfortunately, tens of millions of Americans do not have, or do not want to use, credit cards online. Focusing on the international e-commerce market also brings light to the drawbacks of credit card only sites: While a majority of Americans and Canadians possess credit cards, "plastic" is far less common overseas, which puts companies wishing to do business in the international arena at a distinct disadvantage. As a result, merchants are missing out on a huge target audience of potential shoppers.

Do merchants have another option? Perhaps they should take a closer look at electronic check-based payments.

Put simply, paying by check is easy in face-to-face transactions in brick-and-mortar establishments. But when it comes to electronic commerce, checking has never really been a viable or convenient alternative to credit cards. Over the phone or the Internet, credit cards offer a secure, direct method of payment. Customers can call in or surf a Web site, place an order and read or enter the credit card information directly to the customer service representative or onto the Web site "shopping cart" page. Within seconds, the shopper's credit is verified and the desired merchandise is shipped out immediately.

By contrast, there really is no way to make a purchase over the phone using a check. To pay by check, shoppers must manually fill out an order form and mail the order along with a check. Depending on the speed of the "snail" mail, the merchant will receive the payment in three to five days, input the order and deposit the check -- then wait a minimum of 10 days for the check to clear. Only then will the merchant fulfill the order. The requested merchandise should arrive about two weeks later -- a full four to six weeks after the initial order was placed by the customer. In the Internet age, this might as well be an eternity.

Things have changed. Today's electronic check technology has made paying by check a real option for virtual shoppers. This "checknology" can offer some consumers the best of both worlds, combining the convenience of checking with the speed and security associated with paying by credit card -- so shoppers can make instant, direct payments without accruing high credit card balances and costly interest rates.

Using software running on their desktops, customer service representatives can accept check payments directly over the phone. Check payments can also be made through the Internet, as well as interactive voice response (IVR) technology. By simply entering a customer's checking account information (just as you would input a credit card number) into the system, customer service representatives can obtain an approval code within seconds. Merchants can create checks for immediate deposit, or electronically deposit checks via the ACH network to fulfill orders quickly. Check-based payment for customers' purchases can be drawn straight from customers' checking accounts, eliminating the need for postal fees to deliver checks overnight and minus the traditional waiting period for checks to clear. An additional bonus to the merchants is that funds are 100 percent guaranteed, just as with credit card purchases.

The bonus and convenience with this setup is not just for consumers -- merchants benefit as well. There are a broad range of markets in which Internet-based and over-the-phone check payments can come in handy. Essentially, any merchant that relies on real-time billing may be interested in this kind of electronic checking, including online merchants in both the consumer and business-to-business arenas, brokerage firms, public utility companies, cable operators, cellular phone/paging companies, banks and collection agencies. For all of these businesses, electronic checking may serve as a key differentiator in the rapidly growing and daily more competitive electronic commerce arena. By expanding payment options, merchants can offer added convenience and choice, which can help retain existing customers and attract new ones. In today's customer relationship management-oriented business climate, offering choices to suit every customer not only makes good business sense, it is becoming a prerequisite to keep a company afloat. By ensuring secure, direct payments, electronic checking can help reduce a company's operating costs, streamline cash flow and eliminate potential business risks.

Joseph Grueter is treasurer of Intell-A-Check, Corp., a provider of electronic payment solutions. The company's flagship product, Intell-A-Check!, is an electronic check writing application designed to support check payments over the phone and through the Internet, fax, VRU and direct debit programs.

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