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E-Check Electrified

"When you've got your lifeblood involved in it, you came from a different place."

For Mitch Wiggins, President of Western Clearing Corp., "it" is moving money. And the place he comes from is one of non-competitive commitment to his clients. In 1998, Wiggins teamed up with an old military buddy, John Innis, to handle the marketing arm of Innis' company, ACHPC.

As an offshoot of Netstar, ACHPC was unique in the fact that it was the first non-banking entity of the Federal Reserve. Western Clearing Corp. was formed as a separate entity of ACHPC to market check-processing services and solutions. Wiggins' background was in banking, so he first targeted banks and then branched out to small to midsize merchants.

Today, Western Clearing Corp. is going strong as an EFT/ACH Processor, providing its client base direct access to the ACH network and delivering a broad range of financial services, including business-to-business, Internet checking and merchant electronic check clearing. It has just launched a comprehensive "end-to-end" electronic check conversion, imaging and archiving program to both dial-up and PC-based merchants and professional businesses.

Good news for the ISO community. This new suite of solutions will be initiated nationally and marketed through ISO organizations. Good news also for the merchants since Western Clearing Corp. has designed the program to conform to the new NACHA "consumer-as-keeper" mandate.

"While a handful of companies tout their e-check offerings, with the exception of TeleCheck, they are all merchant-as-keeper and do not conform to the existing NACHA rules. Ours does," says Wiggins.

Western Clearing Corp's program provides for the incorporation of a check scanner/imager located at the point-of-sale that will read and transmit MICR data, enabling the ACH credit/debit transaction to occur and will electronically capture an image of the check - thus allowing the "paper" check to be returned to the consumer. Additionally, should the check come back NSF, Western will automatically represent the check electronically (RCK) on behalf of the merchant. The key to the practical implementation of this program is Western's unique capacity to remotely access the scanner/imager for retrieval and transmission of check images for indexing, cataloging and archiving. More important, these images are transmitted via a high-speed communication link and not transmitted through the credit card terminal. As any smart ISO knows, merchants are reluctant to invest in bulky equipment or install additional phone lines but are eager to take advantage of the latest payment-processing technology. Western recognized the dilemma and developed a system that runs off an existing phone line and incorporates an extremely small box with a business-card size board.

"Most terminals purchased in last five years have small memory and are managed by credit card processors who own the application," says Wiggins. "There's only one phone line that goes into the terminal, and that's been the accepted scenario. We have the ability to run one line off the terminal down to the bank check imager. That one line has a 'y' in it which splits off to an image control - the Image Trans 2."

Utilizing Western's program, on the left hand is the credit card terminal. The right hand is where the check image goes. By keeping those two hands separate, the modem in the credit terminal remains at 1200 baud. Since the check images need to go on a higher speed, they're sent on a higher baud through Image Trans 2 with no disruption of service to the merchant. This "device independent" solution doesn't disrupt the merchants' existing terminal environment, either. There is no re-programming necessary nor any requirement to upgrade existing hardware

Western's system incorporates a MagTek solution. The MagTek stores up to 100 images and transmits in a delay mode.

"We do an auto-dial in the middle of the night, saving time for merchant by sending data when no other transactions are being sent," says Wiggins. "The merchant is responsible for sending the credit card images off. We don't want merchants worrying about sending the check images. They can be hands-off with our system."

It's a whole new game, a game that Western hopes will come into play on a large scale. "We talked to so many people before we went after it," says Wiggins. "We've made it as easy as possible to utilize the system because we want our proprietary technology in as many places as possible."

Western also hopes its resellers will embrace its E-Check Program and recognize the opportunity to not only earn commissions on a new hardware device - namely, the Check Scanner/Imager unit - but also residuals at $.20 per transaction. However, Western sees the greater opportunity for ISOs to provide their merchants with an e-check solution that fully conforms to the NACHA mandate and its rules while taking advantage of the rapidly growing segment of the ACH landscape.

So, take one phone line splitter, a MagTek Imager, an Image Trans 2, a high-speed modem with cables incorporated in the system and an ink stamp authorizing the merchant to accept the transaction, and you've got Western Clearing Corp.'s answer to electronic check conversion. That answer's turnaround time averages within seven business days, and its wholesale cost to the reseller is a mere $500, leaving a lot of room for mark-up.

Western Clearing Corp. already has contracted with 42 sales groups, and Wiggins sees that number rapidly expanding as its E-Check Program gains momentum. "We want to add to that figure significantly," says Wiggins. "ISOs are looking for product like ours."

What is Western looking for in ISOs? "We look for people with honesty, integrity and the desire to sell our product," says Wiggins, "Size doesn't matter, performance does. If an ISO is still around, it means they have a significant number of accounts, and we are betting the store that ISOs will go back to their existing clients with this ingenious system and a top-quality product."

To ensure success, Western provides special support as well as special solutions to its ISO partners. Western's sales staff handles ISO training, but a training module will be set up by early summer with national trainers in the field as well.

Wiggins stresses the simplicity of the system over any need for intensive training. "It is as close to idiot-proof as possible," says Wiggins. "After all, I've got to be able to use it. I am not highly technical, and if I can use it, anyone can. It is so user-friendly, the merchant just turns it on and it's up and running. Even the manual is simple, and all cables are color coded."

In addition to ISOs, Western also relies on strategic partnerships to achieve expanded market share. CDCom provides archiving services. As previously mentioned, MagTek supplies the reader. Then there's CrossCheck, which exclusively provides all check guarantee services, selected by Western because of its commitment to the ISO community and its dedication to the smaller merchant.

However, in the event a merchant doesn't want CrossCheck services - or any third-party check guarantee services, for that matter - Western has partnered with Rocky Mountain Retail Systems for verification. "There are some merchants who know their customers so well they don't opt for CrossCheck," says Wiggins, "The merchant simply transmits MICR information to RMRS, who gives either the red or green light." With so much time, money and resources investing in electronic check conversion, Western Clearing Corp. has clearly chosen its path. The big question is whether the market as a whole will pick the same path. Wiggins sees both sides of the choice.

"For some time, the business has been done as merchant keep," says Wiggins. "It requires merchant keep checks for extended periods of time with huge storage problems, and consumers are unhappy about checks not getting returned to them in their monthly statement. When you do have an NSF, the merchant then has to find the check, and he doesn't know he'd have a problem as fast as if he utilized electronic check conversion. The data is all there at his fingertips. That's the pro side.

"On the con side, up until now there's been a lack of ability to utilize image technology. It's been difficult to connect image terminal to credit card terminal to processor. It's also been hard to quantify to the merchant exactly how much money he will save on a monthly basis. Merchants have been confused and misled by technology. NACHA has changed the designation, and the merchants are even more confused."

Wiggins sees education as a large part of getting merchant acceptance of electronic check conversion. He also believes the ISOs who are highly motivated to get a new product and present its case will make the difference as well.

Will educating the consumer play into the game? Not according to Wiggins.

"I don't see consumers needing to be educated," says Wiggins. "Consumers will become inert to ECC. Why? It is just one more step to a checkless society."

Wiggins believes that over the next 20 years America will become checkless. Does he know something the rest of us don't?

Even Wiggins acknowledges this is a bold statement, especially since he sees the major players fighting this new technology tooth and nail and admits there hasn't been a system that demonstrates cost effectiveness and efficiency. However, he doesn't see standardization and regulation as an option.

"At this point, I haven't seen enough to make sense of how standardization would help," says Wiggins. "It's pretty blurry. Who would do it? The Feds? NACHA? I don't think so. They still don't even want to take corporate checks." Wiggins does see light at the end of the tunnel, though. "We face a very, very bright future," says Wiggins. "This is one of the absolute and obvious opportunities of this century. We want to continue to do what we've done in terms of finding what the market demands.

"I don't think we are at the final stage. There are going to be improvements and slicker solutions as time goes on. We want to be there and will be by listening to the market. The first system that satisfies the needs of the small merchants and allows them to feel comfortable will have tremendous impact."

Western is confident it will be the one to satisfy that need.

Western Clearing Corp. ISO contact: Tim Winchester, VP Sales/Marketing Phone: 253-661-9780 E-mail: westclear@worldnet.att.net Web site: www.westernach.com

Company address: 1715 South 324th Place, Suite 400 Federal Way, WA 98003 Phone: 253-661-9780 Fax: 253-661-1282

ISO benefits: - Has just launched a comprehensive "end-to-end" electronic check conversion, imaging and archiving program to both dial-up and PC-based merchants and professional businesses. - Designed program to conform to new NACHA "consumer-as-keeper" mandate. - Systems runs off existing phone line with extremely small box. - With MagTek solution, merchant's data can be auto-dialed in middle of night. - Can earn commissions on new hardware device but also residuals at $.20 per transaction.