The benefits of using a service bureau for pre-authorized check debiting

The benefits of using a service bureau for pre-authorized check debiting

Fiorito, Richard M

Pre-authorized check debiting is clearly the preferred payment “wave” of the future. Millions of Americans have already chosen this form of remuneration to make payments on past-due bills, buy airline tickets, purchase or renew insurance policies, buy warranties on newly purchased merchandise, or to make a new purchase that has been advertised through direct mail. The benefits of this payment method are numerous and significant. The ability to access a checking account, in addition to a credit number, creates many more opportunities for payments as the number of households maintaining checking accounts is nearly double those using a credit card. In addition, many consumers are consciously making the decision to avoid increasing their credit cards, preferring to pay “cash” for purchases and service rendered. Pre-authorized check debiting is convenient. A verbal approval over the phone eliminates the need for a stamp, delays in mail time, walk-in payments and the expense of urgency payment methods.

Companies have choices when considering pre-authorized check debiting. These choices revolve around three issues: security, convenience and system integration. In a stand-alone system, the “bare bones” of the pre-authorized check-debiting functions, the printing of checks is included. Greater security and a more comprehensive array of reports can be achieved by using a full-service bureau rather than a stand-alone system.

Service bureaus can offer the following, depending on the company you have chosen to utilize for this state-of-the-art method of payment.


* File encryption secures data being transmitted through a modem.

* Implementation of firewall systems prevents unauthorized access into the service bureau system and provide added protection of sensitive data.

* Detailed access privileges can be obtained through multilevel user log-ins. Access attempts and failures are logged and retrievable by management for audit and security.

* Duplicate check entry is prohibited, which prevents this problem from being created as a result of user error.

* Capacity plans and procedures have been developed to maintain historical data in a secured environment.

* Contingency plans are in place to protect integrity of secured data.


* Customer service is available 60 hours per week. This means immediate availability to you for general inquiries, special requests or systems support. It also means significant availability to your customers, who have been provided with the service bureau number to assist them with inquiries about the process.

* Export/import features provide vehicles for high-volume processing while significantly reducing manual data entry.

Report production consultation and development is included, without additional cost. Report tailoring is encourage.

* Remote support is available that allows the service bureau to dial into your system after you have set an authorization flag, to assist you with diagnostics or more complex technical issues.

System Integration

* Quarterly American Bankers Association (ABA) and ZIP code database updates are provided at no additional cost, and are geared to making your life easier and your organization more profitable.

* Alternative check processing abilities exist, so users who print on-site can have checks printed at the service bureau in the case of a hardware failure at the user site.

Although stand-alones can provide a mechanism to produce checks, you should consider their ability to provide the following, which should be standard in any service bureau you research:

* Locked payee slot — Inability to “alter” payee slot at user whim.

* Security provisions for your organization.

* ABA database — A check-and-balance in this field is essential for payments of checks for the payor’s bank.

* Multiuser oriented — Network compatibility is important for multiuser purpose.

* Indefinite volume capacity –Your business growth should never be prohibited by an application.

* Third-party involvement –This is very important for you to consider to protect your company against fraud and abuse.

The Federal Trade Commission has taken a very firm approach to abuses in the pre-authorized check debiting industry. This is a valuable payment method and it works well for thousands of companies and millions of consumers. Ask the right questions to make sure you are getting what you are paying for, and that your company is protected from fraud. There is a certain quality of service you should expect, and there are companies that will provide you with that, and much more.

Richard M. Fiorito is president of Accelerated Payment Systems (APS), a division of National Credit Management Corporation, a Maryland-based financial services firm specializing in receivables management for businesses nationwide. APS provides electronic check drafting services, focusing on collections and sales applications for banks, retailers and utilities.

Copyright Technology Marketing Corporation May 1996

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