hen presenting check conversion services to new and existing merchants, you might face some resistance. Merchants might be aware that about a million bad checks make their way into merchants' accounts each day. Perhaps merchants worry they will encounter the following scenario: They receive a check for payment, they scan the check, and a few days later it is returned because of nonsufficient funds, or NSF.

Not only are the businesses left without a check, but also the check writer's contact information. Merchants believe they have no other option, other than to take the loss. On the other hand, maybe you're working with merchants who are a little savvier and understand that they not only need a check conversion product, but also one that offers fraud protection.

These merchants might also require a product that enables them to accept all types of checks, including personal, business and convenience. They may even expect the conversion solution to include the ability to view and download real-time transaction records.

Fortunately, there is a solution that works for merchants at both ends of the spectrum, as well as for all the ones in between. With Checkgateway, you can provide merchants with a solution that allows them to receive their funds quickly while providing customized fraud protection and detailed reporting. Checkgateway is an automated clearing house (ACH) processor that provides check conversion, fraud protection and recurring billing services. The company recently expanded to also serve as a credit card processor.

"Unlike most of our competitors, payment processing is all we do," said John Kirchhefer, Checkgateway's President.

Checkgateway has been an ACH service bureau since 1993; it is also an affiliate member of NACHA - The Electronic Payments Association.

Founded in 1993, Checkgateway is one of the only ACH processors to use Experian's eSeries Authentication Solution coupled with First Data Corp.'s StarChek network. The company uses Experian's solution to verify the identity of electronic check holders. It uses StarChek to determine, in real time, whether a check is likely to be returned.

Checkgateway even goes one step further in authenticating payments by using its own proprietary software. "We use homegrown software that we've developed ourselves," said Brian Bonfiglio, Checkgateway's Chief Technology Officer. "All software has been developed in-house so that we can accommodate any merchant and modify it to meet their needs. Our company is the only one that I am aware of that can take all those pieces and make it customized," Bonfiglio said.

The company's software, as well as its size (Checkgateway employs only 10 people), allow it to remain nimble and responsive. Merchants determine the level of risk with which they are comfortable and then choose the parameters for the fraud protection service. This results in a solution customized to their needs.

Checkgateway will also continually modify solutions for individual merchants as needed. "If we have a merchant that needs a particular feature, we can add it to the software," Kirchhefer said. "We have the flexibility that a lot of companies do not have."

Checkgateway is focused on the Internet market. "Our focus has always been on filling the needs of Internet retailers," Kirchhefer said. "We are adding new components and branching out, but our main focus remains Internet retailers."

The company's mission is to be the leader in ACH processing and to become the one-stop shop for electronic payment processing. Checkgateway is well on its way; it has increased its processing volume 100% every year for the past 10 years.

ACH, Conversion, Fraud Protection ... You Name It

Checkgateway's products include credit card processing, ACH processing, POS check conversion (ChekNow), fraud services (FraudChek) and recurring billing services.

Checkgateway's processing includes real-time payment verification and is easily integrated with existing accounting systems. It uses the same platforms as credit card processing, so everything is in one place. Processing with Checkgateway also includes the company's fraud solution, FraudChek.

By comparing data with more than 200 million checking accounts in First Data's STAR ATM network, FraudChek will immediately ascertain, in real time, whether an account is frozen, overdrawn or otherwise likely to return a check.

Simultaneously, FraudChek accesses credit bureau information via Experian's data networks to verify a customer's identity. "We use the best databases available to dramatically lower your incidence of fraud," Bonfiglio said.

"We can verify if the account is open, has a positive balance, if there are any pending stop payments," Kirchhefer said. A unique aspect of Checkgateway's services is that merchants determine the level of risk with which they are comfortable.

Merchants can change these parameters as often as they wish. "There are 200 million checking accounts that we can verify in real time and score individually, based on the level of risk the merchant is comfortable with," Kirchhefer said. "Checkgateway's FraudChek is the only service that utilizes a merchant-defined, weighted scoring model to determine whether a transaction is to be approved."

Another feature of Checkgateway's processing solutions is the MerchantCenter, a Web interface that enables merchants to manage all their transaction data from the time they begin processing with Checkgateway.

In the MerchantCenter, Merchants view documents, account statistics and balances, and sort them by a variety of criteria. They establish and modify settings for recurring billing or FraudChek, submit a manual transaction, upload batches through the virtual terminal and issue refunds.

They also manage billings and perform settlement and reporting functions. Perhaps best of all, merchants can download this data to import to their backend software.

The ISO Connection

Checkgateway believes ISOs are an integral part of its success. ISOs bring in 90% of its customers, and the company plans to continue to rely on ISOs.

"ISOs are our sales force," Kirchhefer said. "They are interacting with the merchant a lot more than we are."

The company recently hired a National Sales Manager who will focus on marketing and direct sales and coordinate ISO management. With this addition, Checkgateway plans to launch a more aggressive sales effort, including developing new markets, such as acquirers.

Working with Checkgateway offers ISOs and merchant level salespeople (MLSs) a variety of benefits, but the two of most interest are the revenue opportunities and the on-demand account access.

"If you are a reseller with a strong sales channel who is providing merchants with products and services related to payment processing, Checkgateway is an indispensable part of your billing package," Kirchhefer said.

Merchants are charged a monthly fee and a per transaction fee, and Checkgateway offers resellers a 50/50 revenue split. Each Checkgateway account established by an ISO or MLS becomes a continuing revenue stream for as long as that merchant processes with Checkgateway. Occasionally, the company offers incentives and promotions for ISOs.

For example, through Oct. 31, 2005 Checkgateway is offering a 60/40 split for ISOs. Every merchant a reseller signs up with Checkgateway will earn the reseller a 60/40 split above the buy rate for the life of the contract, rather than the normal 50/50 split.

The company has a 24-hour account approval process, so the reseller's earning starts as soon as the client relationship is established. Checkgateway also reports a 99% approval rate, so ISOs and MLSs will receive the best return on their sales efforts. Adding to the revenue opportunity is the fact that Checkgateway does not charge merchants application fees or setup fees.

If ISOs and MLSs choose to, they can sell the service as a value-added offering, without any upfront fees, or they can choose to charge an application and/or setup fee, which they are free to keep. Just as merchants receive detailed account information via MerchantCenter, ISOs and MLSs receive detailed, downloadable accounting and reports via Checkgateway's ResellerCenter Web interface, which will be available this fall.

The ResellerCenter allows ISOs to view all transactions related to their merchants' accounts. They can view details about processing volume and how much residual they currently have due to them. They can also view reports detailing residuals sorted by merchant.

ISOs and MLSs can also choose when they are paid. All payments are made via ACH, and resellers can be paid at will by simply clicking a button on the Reseller Center Web site. Or, they can set up a schedule of regular payments.

Whether selling to a small, "mom and pop" store new to the industry or a large chain with decades of experience, Checkgateway might be the solution the merchant needs.

The company offers flexibility in integrating its services into the merchant's existing business systems, and it works to continually update its product line.

"We've been around a while, and we are constantly innovating product offerings and services," Kirchhefer said. "We consistently reinvest capital into proprietary technologies that offer the most efficient and reliable platforms in the industry.

"If we see a product that needs to be added, and it makes good business sense, we will do that. Not only do we make more money, but the ISOs and the merchants do as well."