American Banker, November 25, 2003

American Banker explored the future outlook of check verificaiton services in the November 25, 2003 article, "Mulling Check 21's Impact on Verification Services." Excerpts from the article:

As the banking industry builds the infrastructure necessary to exchange digital images of paper checks, questions are starting to bubble up about whether the new technology will one day make check verification services obsolete.

The Check Clearing for the 21st Century Act is widely expected to facilitate the use of digital images of checks for clearing and settling; once it takes effect next October, banks will probably begin transmitting these pictures of checks across the country instead of physically moving the paper. As part of this transition, many industry players predict, the banks will soon attempt to convert the paper checks into images the instant they enter the payment system - at automated teller machines, at teller windows, and at merchants' cash registers.

That shift will lead to profound changes in the payments system, said J.D. "Denny" Carreker, the chairman and chief executive of Carreker Corp., a Dallas financial services technology vendor. "It could shake things up a lot more than people realize," he said.

Merchants' ability to convert checks at the register and zap them to the bank will eventually evolve into a real-time deposit service, Mr. Carreker said....the next logical step is allowing the merchant's bank to verify that the funds are available from the institution upon which the check was drawn. Since several companies are already working to create networks for financial companies to exchange check images, Mr. Carreker said, this instant authorization capability would be relatively easy to add.

...it seems increasingly clear that the image-exchange networks now in the works will eventually connect merchants and banks in real time, meaning that paper checks written at the point of sale could be verified instantly against the check writers' account balances.

TeleCheck International Inc., a Houston division of First Data Corp., is a leading provider of check authorization services, along with such companies as Certegy Inc. and Visa U.S.A. A Certegy executive says her company does not see the shift to image as an immediate threat.

"There will always be fraud," said Steve Geiler, a director of product management at TeleCheck. "Our core offering is risk assessment, and there will always be a value for companies that provide risk management services.

...Avivah Litan, a vice president and research director with market research firm Gartner Inc. in Stamford, Conn.,...nevertheless predicted that verification services with data lag times will "become redundant." Although the changes won't take place for some time, "check imaging can spell the demise of check guarantee systems," she said.

"The better way to do it, very clearly, is to go directly to the customer's bank for authorization, because they have the most up-to-the-minute information," said Dan Yagow, a senior vice president with the San Francisco company.

Ellen Boerger, a director of solutions marketing at NCR Corp. in Dayton, Ohio, said it could take several years before this type of image network is in place. However, she too said the writing is on the wall for TeleCheck and its competitors.

.....Electronic Data Systems Corp.'s Jim Pitts said point of sale systems tend to last about two to three years, and many merchants are likely to consider imaging technology the next time they need to replace their equipment. "Real-time solutions are going to get here....Check verification as we know it today is going to be a totally different animal."