Star Sets Check Service Pricing, Gets Ready to Begin Processing

Electronic funds transfer network Star Systems Inc., which last month announced a new product that makes use of its EFT network to verify and settle checks written at the point of sale in the same way Star processes debit cards, says it expects Star Chek Direct to begin processing transactions during the week of April 19. It has also added two more acquiring processors to the originally announced eight and established pricing for the product. Fees will be “roughly equivalent to grocery debit” on the Star network, says Barbara Span, vice president of brand marketing services. Star currently charges acquirers interchange of 15 cents on high-volume supermarket transactions, plus 4.25 cents in switch and administrative fees. That means a check transaction going through Star Chek Direct will cost about 19 cents. Check verification without settlement, says Span, will run approximately half as much. Span says Maitland, Fla.-based Star, which in February became part of First Data Corp. through First Data's acquisition of Concord EFS Inc., has high expectations for its latest product, but that transaction growth rates are hard to predict. As an example, she cites Star's experience with its 7-year-old electronic bill-payment service, which suddenly spiked upward last year by 256% to 8.8 million transactions, raising eyebrows even at Star. “We were surprised,” says Span. Star's new service, which competes with a similar product offered by Visa USA, will access consumers' checking accounts via the same links it has established for its direct-debit network, which handles 3.5 billion point-of-sale transactions annually for debit cards secured with personal identification numbers. This will allow the service to offer real-time verification of account balances as well as immediate debiting of funds from accounts linked to Star through Star's bank members. As with debit cards, the service offers merchants guaranteed funds. Among the check-processing and ?verification companies Star has signed up to offer the service to merchants are TeleCheck, a subsidiary of First Data Corp., Electronic Clearing House Inc., and BillMatrix Corp., a processor of Internet and telephone payments. Union Bank of California is the first of Star's 6,100 issuers to sign up for the service. Star will not make projections for number accounts, merchants, or transactions it expects for the new service. The number of merchants that could potentially use the service through the acquirers signed so far is still undetermined, Span says. Star Chek Direct relies on point-of-sale scanners that read bank-routing data encoded on checks, which cashiers will run through readers at the point of sale and then hand back to customers. Star research indicates one-third of check-writers at the point of sale are already accustomed to equipment that scans checks. The new product follows on a 4-year-old service called Star Chek, which performs real-time positive-file verification against 200 million accounts belonging to both Star and non-Star member institutions. Star Chek indicates whether an account is open and in good standing, but does not give real-time data on balances.