Host processor

The host processor maintains a check cashing data base. The contents of the data vary by vendor.

Most data bases are maintained by drivers’ licenses. Other indexes used are major credit cards and social security numbers.

Some vendors maintain only check cashing patterns.

Some vendors maintain check cashing history by establishment type.

Data input to the data base results primarily from retailer supplied information. Some vendors utilize information supplied by a department of motor vehicles, financial institutions, and law enforcement agencies.

The check guarantee underwriting decision is based upon a number of criteria including the check amount, the type of retailer (massage parlors pay a much higher premium than do shoe stores), and check cashing patterns.

The guarantee approval /disapproval is communicated to the retailer via the data entry operator or, more frequently, by audio response units.

Check guarantee vendors provide services both directly to retailers on their own networks and to financial institutions which place terminals with retailers. Check guarantee voice networks are a combination of local area dial-up and WATS.

There is a wide variety of retail authorization terminals which permit electronic check guarantee transactions. The more recent models are designed for both check guarantee and credit card authorization transactions. Their characteristics are outlined in Section F, Trends. A major feature of retail authorization terminals is automated dialing of and message formatting for alternate check guarantee voice and data networks.

Retail Establishments

A major problem with check verification/guarantee services is consumer identification.

Some services use plastic cards (i.e., Honest-Face, CASHEX).

Many use drivers’ licenses. Drivers’ licenses are not always effective in large metropolitan areas where significant portions of the population do not drive cars.

Major credit cards (i.e., Visa, MasterCard, American Express).

Three data items are required for check verification/guarantee.

Consumer identification— 16 bytes.

Amount— 8 bytes.

Store identification— 12 bytes.

Check verification services evaluates the transaction and advise the retailer, utilizing a qualitative scale, on accepting the check. The final decision is the retailer’s who bears check losses. Check guarantee services underwrite the transaction, purchasing, without recourse, uncollectable checks.

Check guarantee transaction systems for retail establishments are illustrated in Exhibit 111-13. Check guarantee data networks are separate from, but at times interconnected with, card authorization data networks. INPUT believes that over time the two types of networks will become more closely integrated.

Virtually all check guarantee services utilize the telephone network to some extent.

Telephone for basic service at small establishments.

Voice for “over floor” limits (i.e., $1,500), and exception items for electronic transactions initiated through retail authorization terminals and electronic cash registers.

The data entry operator at the check guarantee center enters the transaction into the host processor.

POS

An in-store POS microcomputer system with a data base that is operator controlled. The ploy is to induce the consumer into the store for impulse buying of store merchandise.

The semi-automated operation is as follows:

The consumer enters the store with his credit/debit card.

The consumer selects the gas pump and proceeds to activate it while the operator obtains authorization for the transaction.

Upon completion of the purchase, the consumer returns to the store to purchase additional items as necessary and to obtain the receipt for the transaction.

Advanced convenience store (POS) systems accomplish inventory control, cash management, transaction balancing, order entry, and other functions. These systems offer a myriad of opportunities for additional information and network services offering.

Gas station and credit cards

The consumer enters the pump number, the maximum sales amount, debit or credit card, and (if a debit card) the secret personal identification number (PIN).

The gas station microcomputer system checks its data base for negative file (“hot card”) and for independent oil dealer’s authorization information.

Authorization messages are sent to a local area transaction switch which can route the transaction to the independent dealer/company host in the case of credit authorization to a credit authorization network and in the case of a debit transaction to a bank debit card network.

On the average, transactions are authrorized in five seconds. They are returned to the gas station microcomputer system which activates the gas pump.

When the consumer turns off the gas pump, the microcomputer system completes the transaction and prints receipts at the card authorization terminal.

The gas station microcomputer system sends charge/debit data from the last transaction with the current authorization transaction to the local area transaction switch and on to the dealer/company host for purposes of data capture, balancing, clearance, inventory control, etc.

An alternate to complete automation is the single operator maintained convenience store.

Gas pumps are electronically controlled.

Retail Gasoline Service Stations

Retail Gasoline Service Stations

Credit/debit card authorization systems for retail gasoline service stations are illustrated in Exhibit 111-12.

Retail gas stations and closely allied convenience stores are a rapidly emerging market for offering credit card authorization services. Although bank debit card transaction experiments are underway, primary action is with oil and bank credit card transactions.

Completely automated card transaction systems for gas stations include:

Card authorization terminals.

Electronically metered gas pumps.

A station microcomputer system with a data base.

A local area switch.
Credit card authorization proceeds as follows:

The consumer activates a selected gas pump.

The consumer enters credit card information through the card strip reader at the authorization terminal.

Credit cards

Most contain a credit card strip reader to read magnetically enclosed card information.

Many have a built-in telephone or have the capability of being connected to a telephone, thereby gaining access to a voice line.

Newer models contain microprocessors and sufficient data storage for handling data capture and polled data transmission and settlement.

The terminals contain various levels of intelligence to create the multiple protocol and message formats to properly transmit and receive information over multiple vendor data/interchange networks.

Access to voice authorization networks is provided for over “floor limit” and other exception authorization transactions.

Data entry and function keys and minimum visual display are provided to create electronic data transmission and receive automated authorization.

• Retail authorization terminals can be connected to multiple credit card authorization data networks. The network entered is that of the primary service provider (financial institution, credit card association, commercial processing vendor, and more recently VAN vendor(s)). Accounts not held by the primary vendor are routed through credit card interchange networks to other card authorization centers or to financial institutions.

• Large, and increasingly, medium size retailers are installing electronic cash registers with comprehensive voice and electronic interfaces to credit card authorization networks. Newer units have full voice and data communications capabilities integrated with ECR resulting in a comprehensive POS system.

ECRs enter credit card authorization networks via a local (in store/area) switch. The authorization can be routed either directly to credit card authorization networks or via the retail host network (national/regional retailers) to credit card authorization data networks or credit card interchange networks.

Authorization transactions

Alternate numbers are usually provided to reduce, but far from eliminate, busy signals.

The retailer is connected to the data entry operator at a credit card authorization center at a financial institution, a bank card association, or most frequently a commercial vendor. The data entry operator enters the authorization request into the local host processor. The authorization process first checks against a negative data base (lost, stolen, hot, closed, etc.) accounts.

The process next checks to see if the account is held locally. If not held locally, the transaction is transmitted through credit card data interchange networks to the appropriate authorization center.

Financial institutions establish individual criteria (i.e., maximum transaction amount, number of transactions per account per day, etc.) for credit card authorization center approval.

Authorization transactions not meeting pre-established criteria are routed to the client financial institution of credit card authorization transactions and are transmitted to the retailer either via the data terminal-data entry operator or increasingly more frequently by audio response units.

Once connection is made, voice initiated credit card authorizations are accomplished in from 10-40 seconds. Use of audio response units reduce average transaction time by approximately 25%.

A wide variety of retail authorization terminals are used to access multiple credit card voice and data authorization networks.

The terminals contain modems and automatic dialing capability to speed up the connection process.