Personal Check Accptance Business?

Question

I want to start a business that allows smaller stores/chain restaurants to accept personal checks as a form of payment. The idea being that my company is backed by someone with "deep pockets" to cover any checks that might bounce. To cover these costs each store wanting to accept personal checks would pay around 1% on each check transaction to me, and they would also pay around 300-400 dollars a year for this service. Any suggestions on how to get started?

Answer 1

This is a very outdated idea. Technology has long since evolved beyond the need to cover bouncing checks. These days, you can effect a direct debit from the checkwriter's account immediately upon receipt of the check (the writer's account number is on the check, bank's routing number is, too, so the only thing you need is a bonded and insured transaction processor whom banks would allow to make direct debits on your behalf, and there are plenty of those out there).

Some processors would also supply you with a bank-style check scanner that would read account numbers and routing numbers without human involvement. So if the customer's check bounces, you can know it right away, while the customer is still in the store...

Answer 2

I see this concept as something that might appeal to chains more. Most smaller stores will accept checks and often do not have merchant accounts for credit cards. Chains, on the other hand, do not want to deal with NSF's in a multi-state environment.

The first thing I would do is to determine if there is a true need for this service as opposed to a perceived need. Do chains accept debit cards? If they do, you might see your market shrink as debit cards become the de facto replacement for paper checks.

Maybe the best way to start is to chat with a few managers at various chain restaurants. Get friendly with them and ask them to lunch or dinner. Explain your idea and ask for their honest feedback. If they like it, ask them who you could talk to at corporate about the idea. Try and get some contact names upstream. Only after you speak with these individuals will you get the higher level feedback you need to evaluate the market for this.

Good Luck!

Michael Casey CPA
Business Consultant
608-271-0068

Answer 3

WE seldom use personal cheques any more. Most of our business is dome by Credit Card. I would think that some people still do, as others I see use cash for everything, as I look at them tightly hanging on to the bills they are using. Would there be a lot of costumers you would get that have no credit, or questionable credit histories? How much of a problem would be to find the backers with such "deep pockets" ? I hope this is not discouraging, , caution would be what I am trying to create here