Your Check is in the Mail

In 1992, a 27 year old inventor named Robert Pollin approached officials of the National Credit Management Corporation with a new software invention which would allow businesses to accept customer’s checks over the phone. He asked $1,795.00 for his invention. The officials, Tom Gillespie and Leeds Hackett, bought the software, and then asked their lawyers whether it was legal. Assured that it was, they tested the new mechanism with their own customers.

“We put it out to our telephone agents for one hour”, recalls Gillespie, “and received over 72 instant payments by check over the phone. We were amazed at the positive response from consumers and businesses alike. Once people found out they could pay their bill over the phone, they would call us back and ask how they could pay their other bills that way.”

When Gillespie and Hackett realized what a bonanza they had on their hands, they called Pollin back and negotiated an exclusive agreement with him to be the sole licensee of a “service bureau” which would provide follow-up notification to consumers, toll-free 800 numbers for questions or complaints, and sophisticated software using Pollin’s process. Pollin applied for and was granted a U.S. Patent for the process in March 1996. In their first year of business, the company they formed, Accelerated Payment Systems, had revenues of $636,594. Since that time, the business has grown at an annual rate of 217%. This new idea promises to open up a huge untapped direct marketing opportunity.

One of the hardest parts of direct marketing is getting paid by the customer. Credit cards have made the process tremendously easier – in fact, it is possible to say that credit cards are why the telemarketing industry as we know it exists today. If we had to wait for the checks to come in the mail, we probably could not sustain the businesses of most of the readers of this magazine. They just wouldn’t be here.

Despite the popularity and ubiquity of credit cards, fifty three percent of the adults in America still do not have one. Until recently, there wasn’t an easy way whereby we direct marketers could get paid by these people. After the phone call, we have to mail them a letter with an invoice and a BRE, and hope for the best. Since 1992, this picture is changing rapidly. Accelerated Payment Systems has been followed by Western Union and a score of other competitors.

The system works this way. While you have a customer on the phone who does not have a credit card, you ask her if she can pay by check. “Oh, yes, I guess so. What a nuisance. Where do I send the check?”

“You don’t need to send the check anywhere. You can pay right now over the phone. Just read me the numbers along the bottom of the next check in your checkbook. Write the amount on the check stub and tear up the check. We will process your payment and a canceled check will show up in your next bank statement.”

After the telemarketer takes the information from the customer, the data is transmitted to a service provider that uses laser printers, Magnetic Ink Character Recognition toner and check stock to create a duplicate of each consumer’s check, which is fully negotiable. The checks, also called pre-authorized drafts, are batched and delivered to the client or the client’s bank.

The service provider usually verifies the check by running the checking account against a database to find individuals who write bad checks. They usually send a “confirmation” notice to the customer right after the sale to remind her that a check draft is being presented in her name. The fees for this service range from $1.20 per check to 2 percent of the face amount. Fees are much smaller in large volume accounts. Bank verification can cost from $1 to $3. Setup fees for the service range from $50 to $1,000.

Large businesses have been quick to sign up for the new service. Current clients include AT&T Universal Card, J.C. Penney, the USAIR group, Banc One Corp, Baltimore Gas and Electric and MBNA.

How can you protect yourself if a customer says that they never authorized you to issue a check in their name? Many users store a taped verification of the phone call with all the information obtained in the call.

What are the reactions of consumers to the new payment method? In general they seem surprisingly good. David Weiss, President of ChekDebit a major provider of check- over-the-phone services, reports that a Public Broadcasting System station in the South scored their highest pledge night in the station’s history when they used bank drafts for the first time. Using the checks over the phone system eliminated the “bill me” option. Most of the pledgers were seniors. Many selected payment by checks over the phone because of the novelty of the idea. More than 10 percent of the pledges came in by checks over the phone.

As we look ahead, this simple invention may well create a huge new industry on top of the one we already have. There are millions of people who don’t have credit cards, but do have a bank account. For all practical purposes, many of them have been left out of the direct marketing revolution. No longer. Anyone who has a checking account can now order anything by phone, make immediate payment, and get immediate delivery. While checks by phone seems like a novelty today, it is expected to grow rapidly to a staggering size. Richard Florito, President of Accelerated Payment Systems estimates that pre-approved check processing fees alone may reach $500 million by the year 2000 and $1 billion by 2005. Others put the figure in that year as high as $3 billion.

If you don’t currently offer checks by phone to your customers, you might look into the possibilities. You could be missing one of the greatest money making opportunities of the future.

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