CheckFree - Facilitating payment networks

CheckFree began facilitating electronic payment in 1980, almost as soon as when the technology became available. In the US, the company plays the role of a payment processor, performing batch operations of inter-bank debit and credit transactions. Harry Chopra, CheckFree’s Asia-Pacific managing director takes ZDNet Asia through a tour in history

The banking network and the sets of rules that apply in the Asia-Pacific region, are very different from those of the US. As CheckFree moved into the region earlier this year, its management decided early on that a different strategy needed to be adopted to seize the e-payment market in the region.

“As a company, we can’t just walk into a country like Singapore and say, ok, give us everything we want and we’ll do exactly as we did in US,” said Harry Chopra, CheckFree’s Asia-Pacific managing director, “we can’t do that.”

Electronic crediting and debiting, in the US, is done through a Central Bank owned facility called the Automated Clearing House (ACH). However, for banks to perform the transactions themselves would mean that they’ll have to account for all the bank to bank relationships that occur whenever a transaction is carried out. In a market where there are more than a thousand financial institutions of all shapes and sizes, that could be a problem.

The CheckFree system solves the problem by assuming the task of working out those transactions from the banks. Collecting billing information from separate banks, CheckFree consolidates the debit and credit details, formats them into ACH format and performs batch operations through the clearing house on a daily basis.

The system makes it quick and easy for bank-to-bank transfers to occur and for settlement of payment to take place within the day.

“Any bank account, any consumer, any biller, no checks, and you get your money the next day,” noted Chpora. “It’s a beautiful system.”

More onThe State of ePayment.

There is no exact replica of the US system in the Asia-Pacific region. In Singapore, the banking consortium-owned Nets performs the function of a payment processor, much like the role of CheckFree in the US. Automated clearing is carried out in a facility called the BCH, a clearing-house jointly owned and operated by the Monetary Authority of Singapore, the OCBC bank and one other bank.

Inter-bank transactions are tightly regulated, not allowing for the kind of immediate payment flow that is found in the US system. As such, large billers have to open an account with almost all of the major banks in Singapore in order to keep their payment data updated. Alternatively, a GIRO platform can be implemented for billers to deal with each bank on an individual basis.

The set up presents a brand new challenge for CheckFree to operate in. An environment that would not permit the solution provider to play as prominent a role as it does in the US.

“The US market is a fairly fractured market, so CheckFree exists because of the nature and the diversity in the US as a processing company,” explained Chopra. “Out here the payment systems actually are quite advanced. So what we do in the US is uniquely suited to the US. What we do here is to compliment with what a Nets-like payment processor does. That would be our strategy.”

CheckFree’s first goal is to grow the e-payment market by bringing the major billers of the region online. According to Chopra, consolidation can only happen when the majority of billers have gone online. As such, the first step would be for the biller community to adopt Internet as a channel for payment.

Hence, CheckFree’s strategy in Asia contains a two-pronged approach: On one hand, a sophisticated bill presentment engine and payment processes aimed at enhancing the day-to-day operation of payment processors, in the case of Singapore’s Nets. On the other hand, CheckFree will also be showcasing a bill presentment platform and an Interbank Giro-like system to major billers in the region that will enable their online payment capability.

Although check payments are still popular, Chopra recognizes that CheckFree’s concept requires a lot of education and acceptance among the business community before it can become the norm – and Chopra is confident that it will.