The World Wide Web becomes less like the Wild West every day. As online retailers are learning to use the web in more sophisticated ways to attract and serve customers, consumers are being subject to more involved means of assuring valid e-commerce transactions.
Until recently, for example, consumers who passed bad checks while making online purchases could escape the kind of network oversight of the Shared Check Authorization Network. SCAN has traditionally processed information on bad checks passed for retail purchases only from stores and other offline operations, including utility companies.
But SCAN is beginning to halt its free ride for online check-writing scofflaws. In a service being offered now by payment processor Paymentech Inc. and eFunds, the parent of SCAN, online retailers can contribute information on bad checks to the SCAN database. SCAN will then automatically reject any future transactions in stores and on web sites involving the checking account that had passed a bad check for an online purchase, until the check-writer makes good on his purchase and the retailer removes his name from the SCAN database.
Paymentech says it expects the expanded SCAN service to boost its retailer clients’ acceptance of e-checks beyond the current growth rate of about 50% per year, as the service helps to minimize their exposure to bad checks, says Larry De Palma, director of product management for Paymentech.
He adds that merchants are liable for the full value of bad checks unless they subscribe to a check-guarantee service like Certegy Inc. or TeleCheck International Inc.
Most retailers who don’t subscribe to check-guarantee services usually withhold shipment until a customer’s check has been cleared, De Palma says. But e-checks offer an advantage over paper checks, because retailers usually get an e-check payment confirmation within four days, compared to paper check confirmations that can take more than a week, he says. And as more online retailers add information on bad e-checks to the SCAN database, it will increase the ability of all retailers participating in SCAN to limit their exposure, he adds.
Paymentech expects the new service to be used mostly by large retailers, because of the check volumes needed to get a return on the investment of setting up data feeds with SCAN, De Palma says.
Retailers must be able to electronically transfer files of bad-check data to SCAN. Small online retailers who want to contribute bad-check data to SCAN have the option of using third-party integration software, De Palma says. To access SCAN for verification purposes, users pay from 10 to 25 cents per transaction, depending on volume, he says.