Eyeing a Big Opportunity, ReD Expands into Bill Payment with ARC

Eyeing what it sees as a huge opportunity in processing bill payments, U.K.-based Retail Decisions PLC's U.S. processing unit this month will begin offering the fastest-growing form of electronic check now available: accounts-receivable conversion, or ARC. Retail Decisions USA Inc., which has built its business providing a card-based risk-management and transaction-gateway service to online merchants, is this month switching on what it calls a turnkey ARC payment capability on both its hosted and licensed-software platforms, ReD1 and LiveProcessor. Retail Decisions, which counts insurance and telecommunications companies among its current client base, has tested the ARC product with a handful of unnamed beta clients, but ReD executives expect the new service will bring in new clients?along with substantial transactioin volume. While the company hasn't made specific volume projections, Jeff Foster, executive vice president at ReD, says the ARC capability, along with other new biller services such as PIN-less debit processing, will produce anywhere from one-third to half of the U.S. unit's incremental volume over the coming years. “We've had a nice run with e-tailers like Federated and Wal-Mart, and we'll continue to pursue those,” says Foster. “But what we're really focused on is the biller world.” ARC transactions exploded 339% in 2004's fourth quarter over the year-ago period, to 324.3 million payments, according to NACHA, the rules-setting body for the automated clearing house. NACHA estimates ARC reached 1 billion annual transactions last year, hitting that milestone faster than any form of ACH payment in the 32-year history of the network. One of five forms of electronic check that rely on the ACH for settlement, ARC refers to the conversion of paper checks sent by consumers to billers' central locations, usually lockboxes, into electronic debits. Because of its relatively low cost and faster funds availability compared to paper-check processing, ARC has won considerable popularity among billers and the banks, processors, and software companies that serve them?a trend that hasn't gone unnoticed at ReD. “The merchant's return [on ARC investment] is three to four months,” says Foster. “Sign-offs [from senior management] are immediate.” ReD's new service will include imaging hardware and character-recognition software, thus equipping merchants to begin ARC processing without the need to contract with other suppliers, Foster says. Pricing depends on how the service is delivered. On a hosted basis through the gateway, billers will pay from 8 to 20 cents per transaction, depending on volume. The licensed version depends on the number of servers the software runs on. A single-server configuration for a small biller will run about $75,000, Foster says. ReD's entry into the bill-payment business also includes processing for so-called PIN-less debit transactions, which are payments consumers make on billers' Web sites or through interactive-voice-response units to pay bills. In PIN-less debit, consumers use their PIN debit card account numbers but don't enter or give their PINs, and transactions are routed and settled via electronic funds transfer networks. ReD is providing gateway links to First Data Corp., the processor that owns the Star PIN debit network, in support of a new bill-payment service launched last week by Chase Merchant Services (Digital Transactions News, June 1). “We became an easy and simple PIN-less debit connection for Chase to sell,” says Foster.