There is a revolution taking place in online payment processing, and Electracashis leading the way. The new payment system might someday eliminate the chargebacks that have plagued Automated Clearing House (ACH) transactions for so many years. It's called Signature Safe.
"It's something we created about seven months ago," says Andy Alvarez, marketing representative for Electracash. "It's an online signature program that allows the user to sign their name using their mouse. It's already being used on several of our clients' websites. Instead of being an ACH transaction, it turns the transaction into an actual check. When a user signs up to a paysite by signing their name, it is an actual printed check that the bank will accept."
There's an image of a pen lying on a desk, which pops up when the customer picks up the mouse.
Simply stated, Signature Safe operates similar to ways we now pay at the checkout point of various stores by signing a stylus, only the online customer uses their mouse. The customer starts by going to a typical payment page, filling in boxes that ask for information such as name and account number. When you hit the submit button, it takes you to the next page, which contains a signature box in a Flash application. There's an image of a pen lying on a desk, which pops up when the customer picks up the mouse.
"Signing this way takes some getting used to," Electracash CEO Lee Falls says. "It took me a couple of times to get my signature recognizable. But the customer can hit the 'clear' button and try again if he's not pleased with how the signature looks. We allow three tries to get a good signature. Then you hit the 'next' button, and up pops a check with all the data that you've entered and your signature. The consumer can hit the 'print' button and use that hard copy as a receipt.
"This system allows us to keep that signature on file, so even if the transaction is pure ACH, we can recreate the page with the signature and send that off to the bank and the consumer. With so much data on the check, all parties can determine that it's an accurate transaction," he says.
Signature Safe figures to ease a lot of headaches in the online billing business; in fact, one might say these headaches were the necessity that was the mother of invention.
"You've got these consumers who buy things when they're half-crocked — especially in our business — and then they don't remember making the purchase," Falls explains. "The bank's attitude is always, 'Bad merchant, good consumer.' I started to think about what we could do to avoid all of that. Then this Check-21 thing came along, and I realized that if we can give consumers a check, there would be a lot of white space on it where we could put plenty of information. It works for the benefit of both the consumer and the merchant. The check could contain information like the consumer's name, address, phone number and, if we wanted to, the last four digits of the Social Security number and the birthdate. We also can include the phone number of the merchant and the Electracash phone number, plus the date and time of the transaction and the consumer's IP address. So it gives us a good, solid foundation in which we help the consumer to recognize his transaction. It also gives that same information to the bank, so that any denial of the transaction would have to be pure identity theft."
This exciting new system became possible with the passage of a law called Check-21, which allows for legal recognition of a file containing the picture of a check with all the pertinent data on the bottom, such as the routing number, the account number and the dollar amount. The law states simply that the image or photo of a check is just as good as the original check, and none of the ACH rules apply.
"It's all electronic now," Falls says. "Only the first person physically handles the paper. After that, we're only passing along electronic files. We send the check to one of our vendors, and a hard-copy check is printed. This creates what we call a Check-21 file, which is just a picture of a check. The rules right now call for having a paper check to begin with, but those rules may change in the future to an all-electronic system."
Although Falls admits that his firm's Signature Safe system will not totally eliminate chargebacks, he is positive that it will significantly reduce them.
"We've seen a reduction as high as 90 percent in some cases," he says. "The reason is that there's more data in Signature Safe transactions, so it's easier for the consumer to recognize that he did it. The ACH system made it super simple to charge things back, and the rules are honored in the breach by most banks. They're supposed to get an affidavit of forgery from the consumer, and most times they don't. They just push the button and charge it back, and there's absolutely nothing you can do about it.
"In the check world," he adds, "you can't charge it back without that affidavit, and no bank will accept the chargeback without the affidavit."
Of course, there is still the danger of forgery in this new system, but even if someone steals a bank account number, Electracash can trace the transaction back to the buyer's IP address. Forgery, of course, is a felony.
With the new transaction system in place, Electracash figures to see a banner year in 2009. The company already has signed up a lot of new merchants, and several new banking partners have been brought into the fold. There also are plans to extend into the European market with the new checking setup.
Another reason that Electracash will see growth in 2009 is the strengthening of its affiliate program for electronic payment resellers.
"It's much like the ISO program with credit cards, where people resell our products," Falls explains. "We give them a buy rate with various programs, and many of our merchant resellers are doing very well. Our affiliates are excited about this program."
And so is Falls, who started Electracash on a computer in his garage way back in 1999. He's watched his company grow to its current size, employing 25 people in its Signal Hill, Calif., office.
Judging from the initial response to Signature Safe, Electracash figures to get much bigger in the coming year.