How Certegy’s PayNet service closes more online sales and provides a 360-degree view of customers
When it comes to payment, most of Internet retailers’ focus has been on credit cards. They make up virtually all retail payments on the web.
Yet Certegy Inc.’s Check Services group is building a nice business on check payments over the web. In fact, boosted by customer wins with Dell Computer Corp. and Gateway Inc., electronic check volume at Certegy Check Services has blossomed from about $50 million a month in the middle of 2001 to $100 million in December—and Certegy expects that rate to be the new base for this year. “More and more retailers want to offer more payment options,” says Jeff Carbiener, Certegy senior vice president.
Certegy, formerly Equifax Check Services, a division of credit bureau and payment database company Equifax Inc., landed Dell in the second quarter of 2001 and Gateway in the fourth quarter as customers of its PayNet service, which allows consumers to pay via an electronic check. Customers who wish to pay by check rather than credit card can provide checking account information on screen or to sales reps. Certegy authorizes the information, then converts it into an electronic check.
Electronic checks have become an important part of retailers’ strategy to close more online sales. Some retailers have reported that as many as 60% of customers who place an order by phone never follow up with the check. Collecting the information at the time of the sale has proven effective in closing those sales. Certegy customer Sears Parts Direct, for instance, says its mail-order volume has decreased by 47% since it began accepting PayNet check payments in the third quarter, while check sales have increased 24%. Furthermore, the time to complete a check-based transaction has been reduced by a week—meaning the customer has the product in hand sooner and less opportunity to re-consider the purchase.
A long history
And consumers, too, want to pay with checks online. The Washington D.C.-based National Consumers League reports that 43% of adults say their biggest worry about online shopping is that their credit card numbers will be stolen and 59% believe it is safer to pay with a check or money order online than with a credit card. Certegy is hoping to make that a reality.
Certegy
has a long history in authorizing and processing check transactions. It started
in 1961 as Telecredit Inc., which authorized transactions at the retail point
of sale. Telecredit was acquired in 1990 by Equifax Inc., a credit bureau that
was making a natural expansion into payments processing. Certegy spun off from
Equifax in July 2001 and is now a publicly held company in its own right, with
annual revenue of $851 million, 6,300 employees and operations in nine countries.
It processes both credit card and check transactions and processed 1.7 billion
payments transactions last year and guaranteed or verified $32.1 billion in
check payments.
Securing a PayNet transaction starts with a consumer completing a brief questionnaire
that gathers basic information about the consumer: name, address, phone, length
of time at current address, etc. Certegy uses its database to create a series
of multiple choice questions related to financial information that the customer
answers at checkout time to verify identity. The questions include asking, for
instance, who holds the consumer’s mortgage and the size of the payment. The
web shopper provides a checking account and bank routing numbers to the web
merchant to initiate the transfer of funds. Certegy then guarantees the payment
and transfers payment to the merchant using the Automated Clearinghouse Association
system.
After the first payment authorization, the customer provides a user ID. Certegy
then e-mails a password to the customer for future use.
Certegy presents the consumer questionnaire in simple language with easy to
follow instructions and several pitches along the way as to why consumers should
participate in an identity verification procedure. The consumer screen starts
with the headline “Don’t be a victim of identity fraud.” The next item the consumer
sees is a boxed message explaining the procedure and briefly presenting Certegy’s
credentials as a protector of consumer information. After explaining the steps,
the screen wraps up with another pitch: It repeats the message Don’t be a victim
of identity fraud and restates the value of participating in the Certegy program.
The next two screens take the consumer through registration.
Easy and streamlined
Fraud by e-check as a percent of sales right now is higher than credit card fraud on the Internet, says Cathy Reed, senior vice president of operations. But she expects that to decline as check volume increases. “The fact that the percent of check fraud is a bit higher is attributable to the small proportion of shoppers who are using checks online,” she says. “Fraudsters are always the first to try something new.”
The largest element of fraud today is identity theft, she says, which is exactly
what the PayNet procedures are designed to catch. But not all is automated;
sometimes Certegy will call a customer to verify the transaction if it looks
suspicious, such as a disconnect between the bill to address and the ship to
address.
Certegy designed the PayNet product for both web and phone payments. While
customers fill in the information for the web-based payment, customer service
reps do so for telephone payments. And that requires some training, Carbiener
says. Certegy trainers teach telephone reps how to read the numbers at the bottom
of a check, what the numbers mean and what the various symbols mean. Because
of the frequent turnover in phone rep personnel, most retailers need training
every six months, he says. “But that’s one of the reasons we made our process
very streamlined and easy,” he says.
Certegy’s Internet volume is about a third of its overall electronic check
volume, Carbiener says, although as online shopping becomes more widespread,
that percentage will grow. “This is one of our growth engines,” he says.
Yet
bricks-and-mortar check processing will remain an important part of Certegy’s
business. Certegy does business with hundreds of retail chains, including such
major retailers as Sears Roebuck and Co., Kmart Corp., Circuit City Stores Inc.
and Best Buy Inc. “We will continue to develop those solutions at the same time
as we develop the Internet infrastructure,” Carbiener says. “The bottom line
is that it’s the bricks-and-mortar implementation of these products that has
allowed us to handle Internet volumes.”
In fact, Carbiener notes, offering check services across all channels improves
the quality of data and authorizations in all. “Our historical experience in
the bricks-and-mortar world is driving our success because we are able to leverage
that expertise,” he says. “We don’t care how the transaction is delivered because
there are similar risks in all transactions.”
He adds that Certegy’s breadth of experience also helps its retail clients.
“We try to sign retailers for all channels—Internet, phone and retail,” he says,
“because then each retailer gets a better picture of who its best customer is.”
