Star Plans to Extend Check Conversion to Bill Payments Later in ’05

Star Systems Inc. will begin processing bill payments through its electronic check-conversion service, Star Chek Direct, by the end of the year, according to officials at the network. In the bill-payment scenario, consumers will be able to pay billers in certain low-risk industry categories, such as insurance and utilities, by entering their checking-account and bank-routing numbers on billers' Web sites or speaking them into an interactive voice-response system. As with Star Chek Direct at the point of sale, authorizations would occur in real-time, with guaranteed funds to the merchant and overnight settlement. Star executives will not project transaction volumes for the new bill-payment service, pointing out that it's too early to say. But clearly the electronic funds transfer network, which helped pioneer the business of PIN debit in the U.S., has high hopes for this new twist on in its check-conversion product, which it introduced only last year (Digital Transactions News, April 9 and Feb. 20, 2004). “We're pretty excited about it,” says Julie Saville, vice president of Star network product development. “It's another great opportunity for long-term growth.” When used for bill payment, Star Chek Direct will closely resemble so-called PIN-less debit, a form of direct debit from demand-deposit accounts consumers can use now to pay bills from certain low-risk biller categories online and through IVRs. The difference will be that consumers will enter checking-account data rather than their debit card account numbers. “It is exactly PIN-less debit except we're routing check data on the MICR line instead of [debit card] account numbers,” says Saville. It may seem a small difference, but Saville thinks check conversion through a PIN debit network will appeal to billers, in part because some consumers might prefer to enter checking data to giving up PIN debit account numbers. “Allowing more ways to accept payments is what [billers] want,” says Saville. Another difference lies in pricing. A Star bill payment carries interchange for a utility company of 0.65% plus 12 cents, with a 45-cent cap; other billers pay 0.60% plus 12 cents, capped at 35 cents. A Star Chek Direct transaction carries a flat interchange fee, currently around 15 cents. This could appeal to billers like secured lenders that deal in high payment amounts. But like PIN-less debit, Star Chek Direct processes without PINs, which means merchants assume the liability for fraudulent transactions. Star rolled out Star Chek Direct for point-of-sale check transactions 16 months ago and has so far brought three of its issuers live on the service: Union Bank of California, BB&T Corp., and First Citizens Bank. At the point of sale, cashiers run checks through scanners to pick up MICR data and then hand them back to consumers, much as they do with check conversions based on the automated clearing house. But with Star's product, merchants get a real-time authorization of funds availability and a payment guarantee. Merchants may for a lower fee opt for only the online authorization. A similar service offered by Visa U.S.A. bundles settlement with online authorization, but does not offer standalone authorization.