his just in: A new electronic check verification product went live July 13, 2002. It's a whole new approach to accepting and processing checks. Craig Tims, President of SyTec, Inc. said it's the biggest thing since electronic credit card processing.

Simply put, the P.A.I.D system (Payment Authorized Instantly Debited) converts paper checks into real-time debit transactions. The merchant gets paid without a lot of transaction fees, volume-percentage fees or fund-collection fees.

SyTec's P.A.I.D program is a merchant acquirer processor for SafeCHECK, which is jointly owned by 11 leading financial institutions, three EFT Networks and SVPCo. Tims said that, as the first POS processor for SafeCHECK, P.A.I.D is making it possible for a whole new clientele to accept checks safely and inexpensively.

Tims founded SyTec with his wife, Terry, in 1994 as an ISO working with preferred merchants. They changed the corporate structure in 2000 to become a fully independent acquirer processor.

Now they're an all-inclusive EBT processor and, together with partner John Frank, they are creating market opportunities and looking for qualified independent agents to present P.A.I.D to merchants ranging from grocery stores to restaurants.

P.A.I.D works with an SVPCo-patented processing methodology, Tims explained. Merchants can accept a check at the point-of-sale, run it through the special reader and within seconds know that the account is valid and contains funds sufficient to cover the transaction amount.

The amount of the check is instantly debited, is guaranteed for 100 percent of the face value and can never be returned for non-sufficient funds.

The system is based on an interchange/revenue model, Tims said. Data travels via the same EFT networks used by ATMs. Unlike check verification, data files are never old or inaccurate.

By accessing all available DDAs, P.A.I.D enables retailers to verify online and in real time from the point-of-sale that checks are legitimate.

P.A.I.D accesses 13 ATM networks, including STAR, Interlink, Pulse and NYCE. It also virtually eliminates all risks normally associated with accepting checks. NSF checks, closed accounts, bank-return fees and the high cost of check guarantee programs are problems of the past.

Unlike other check verification systems, data files are never old or inaccurate because the process happens in real time.

The process is fairly simple: The customer writes a check to pay for a transaction, which the merchant runs through the reader that sends the information to the merchant acquirer, or P.A.I.D. It is then processed through SafeCHECK and one of its issuer-bank members.

Verification is returned through SafeCHECK and P.A.I.D, which then settles the transaction with the merchant's bank with a direct deposit.

Once a check is inserted into the reader, the merchant will receive an authorization number. When approval has been ascertained, the check is accepted and the funds are immediately set aside, just like a debit card/check card transaction.

Settlement occurs within 24 to 48 hours, and funds are deposited directly into the merchant's checking account.

The system features the P.A.I.D All-in-One Terminal, which accepts payments for transactions made with credit, debit and smart cards, loyalty and gift cards, and checks. The terminal includes the check reader and will process the checks and print receipts.

Even though the program was just rolled out in July, Tims said it already is drawing raves.

"Merchants have always wanted something like this," he said, "because we're able to verify the amounts in the accounts immediately. This is the first time we've physically gotten into accounts.

"We have merchants standing in line. One major retail chain wants 400 units, and all they're asking is, 'When can you install?' "

The program gives merchants the opportunity to accept checks. "Businesses like restaurants, who in the past wouldn't even have considered taking checks, are now able to. In fact, checks are often the preferred method of payment - it costs the merchants less than credit cards," Tims said.

"Grocery stores are another excellent market. Although most small stores have their own systems in place, we do have several large chains looking at us because accepting out-of-state checks is not an issue with P.A.I.D. The program also works well with e-commerce businesses and debt collection."

Normal debit rules of dispute prevail when transactions made through the P.A.I.D system are challenged. "You have to have a pretty strong fraud case," he said.

The cost for running checks through the P.A.I.D system is a flat 75 cents per check with no percentage fees. "There is just no comparison to the cost of check-guarantee services. This is just a fraction of the cost," Tims said.

The program is being marketed to mid-volume merchants on up, or those who take 100 checks a month or more, he said. At some point in the future, the pricing model might be changed to a tiered model based on average check size.

To keep pace with demand, Tims said SyTec has instituted an ISO program, and the emphasis is definitely on working with quality people.

"Our concern is that we are the first to offer the P.A.I.D program in the general market," he said. "The 11 banks backing SafeCHECK want the system presented to the market with high standards.

"We have a staff of 11 people right now but no in-house sales force. We're signing up 30 to 40 merchants from all over the country a day, though, despite that. We are not a blood-and-guts, hip-shooting kind of operation - we're firmly entrenched in the financial services industry. We look at ISOs as partners, not competition. As a processor/acquirer, we're very sensitive to ISO concerns, and in the case of a conflict of interest, the tie goes to the ISO."

Still, the emphasis will be on looking for dedicated, committed ISOs to partner with, Tims said.

"I can't stress enough that we are going to be selective in who we'll be working with," he said. "We're not looking for weekend warriors. We want serious, career ISOs.

"We've been around long enough and know enough people in the business, but there are lots of new organizations out there we'd like to get to know. We're going to be giving them something special.

"We think we're going to change the face of the entire merchant check acceptance industry."