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The Opportunity
For the agency/organization
Significantly reduce net check expense
Faster funds movement
Better loss prevention
Faster, higher percentage of bounced check collections @ lower cost
Streamline handling/ reporting for debit, credit & check in single
operation
Single source of reports
Settle with other payment types
Single source of tech support
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'SA !OS Check !rocess
Overview
Converts paper checks into electronic payments at the point of sale
Built on existing VisaNet Single Message System like offline debit
Ability to route and process POS Check Service transactions similarly to
debit and credit transactions
Provides integrated payment and online reporting
Key Differentiators
Utilizes the world's largest payment transaction processing system -
VisaNet
Potential connectivity to 90% of the DDAs in the U.S. and millions of
U.S. merchant locations (20% of current transactions are with
participating financial institutions (Fs)
Real-time authorization of check transaction against consumer's DDA
(for participating Fs)
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Third !arty
!rocessor
Drawee Bank
Merchant
Acquirer/
!rocessor
Presents check
Gets check
back
Signs sales
draft
Swipes check
through MCR
reader
Voids check
and hands
check and
copy of sales
draft back to
consumer
Formats
transaction
into an
authorization
message and
forwards to
VisaNet
Customer
Edits/validates
transaction
Forwards participating
conversion, verification
and guarantee
transactions to a
drawee bank
Forwards non-
participating conversion,
verifications and
guarantees to a third
party
MERCHANT
Performs standard
authorization
processing
"Participating tems
'SA !OS Check FIow
Performs verification
"Non Participating
tems
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Authorization - Third !arty vs "!articipating Bank"
!articipating Transactions - The Drawee Bank
Check authorization message routed to check writer's account if drawee
bank is a participating in the Visa POS Check system
Real time online authorization direct to writer's DDA
Transaction processed through Visa's processing host and settled
through Visa's backend
Non-!articipating Transactions - Third !arty
Authorizer
We utilize Echo, a third party provider, as "stand-in processor for non
participating transactions (writer's drawee bank is not a participating bank).
Echo utilizes historical databases and risk logic to approve/decline the
transaction
Echo debits the check writer's account through the Federal Reserve
System (Automated Clearing House (ACH)).
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'SA !OS Check Drawee FinanciaI nstitutions
Source: POS Check Service Production Data June 2005
This information is Confidential and may not be distributed without the written consent of Visa.
12
'SA !OS Check Service Options
Conversion OnIy
Conversion
with 'erification
Conversion
with Guarantee
The check is converted at the point of sale
Transactions are authorized by a drawee financial
institution or third party
Merchant retains risk of loss
Provide access to DDA accounts and/or third party
risk management databases to determine
probability that check will be paid
The check is converted at the point of sale
Merchant retains risk of loss
Guarantor effectively buys check from merchant
Guarantor makes online accept / decline decision
based on access to DDA account and/or third party
risk management negative database
The check is converted at the point of sale
Guarantor bears risk of loss
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'SA !OS Check Service Options
Conversion with 'erification
The check authorization message is routed to VisaNet and then to either
the customer's Participating Bank
Check paid based on current information at participating drawee - acct. status & balance
Check paid based on checking account's eligibility for electronic check conversion
Some drawee banks place a post hold on funds
OR
the third-party authorizer
Check will be authorized/ verified against their available databases, historical activity of the
account and risk logic
Check will be authorized based on known eligibility for conversion to an electronic item
The third-party authorizer returns the accept or decline decision to point of sale
The merchant retains the risk if the transaction does not cIear the check
writer's account
14
'SA !OS Check Service Options
Conversion with Guarantee
n addition to the steps taken for Conversion with Verification, the customer's
bank or a third-party authorizer determines whether the check can be
guaranteed for payment based on available funds or other information.
The rate the merchant pays for guaranteed transactions is a percentage of
the face value of the check plus per transaction fee.
The check guarantor accepts the risk if the transaction does not cIear the
check writer's account
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!articipating Drawee DDA Market Share - August 2005
MT
WY
D
WA
OR
N'
&T
CA
AZ
ND
SD
NE
CO
NM
TX
OK
KS
AR
LA
MO
A
MN
W
L
N
KY
TN
MS
AL
GA
FL
SC
NC
'A
W'
OH
M
NY
MD
DE
NJ
CT
MA
ME
'T
NH
AK
H
!articipating DDAs: Up to 10% 0% to % 20% to 2% 2 30%
DC
!A
R
Source: Visa Member DDA Market Share Data
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Business Case for 'SA !OS Check
Benefits to Government Agencies
Significantly reduce net check expense
Better loss prevention reduce risk of accepting checks access to DDA's
Faster, higher percentage of bounced check collections @ lower cost
Government Agencies collect returned check service fees at little cost
Reduced cost on a per item basis
Minimize or remove bank fees deposit, encoding, return fees
Streamline handling/ reporting for debit, credit & check
Faster check out experience for customer
Fewer paper checks in the your environment
Faster funds movement same schedule as credit items
Settle with other payment types
Government Agencies "stay whole until fatal returns
Single source of reconciliation & reports
Single source of tech support
Consumer acceptance is long since proven by Walmart, GAP, Burlington Coat
Factory and other major retailers.
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Guarantee vs 'erification
Knowing which option is right for your department
Example: Building Permits vs. Motor Vehicle Administration
Can your agency easily rescind what it has granted to enforce collection on
returned checks?
Could your agency or department be out a significant amount of money if
numerous persons abuse the system?
Do you have the staff and time to track down those whose transactions are
declined?
Would using your staff in this way be a productive use of time, or would it be
better to pay a percentage and let the bank take the risk?
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!ossibIe Drawbacks/CompIications
Consequences to Government Agencies
Example: Parking Tickets
How will the city/county handle declines on checks offered as payment?
Are they willing to require a different form of payment if the Third Party
database declines a citizen's check?
What will they do if the citizen doesn't have a credit or debit card?
Will the citizen have any legal recourse if the city refuses his/her check?