Following customer complaints over this practice, and not wishing to lose a significant percentage of their business, check verification services came into being. These services have established databases consisting of all customers who have previously paid by check at establishments using their services. They keep track of all those who have maitained good check payment practices and those who have not. The latter are tagged in the database and flagged whenever the verification system encounters them attempting another check payment. This arrangement means that check services do not need access to your bank account information.
New customers are initially green lighted until they run afoul of the system.
The service makes a profit by charging merchants a percentage of each amount they approve. Merchants are glad to pay this percentage as a business expense to keep that particular customer base. Another advantage of check verification services to merchants is that they assume the risk of bad checks in place of the merchant. In case an approved customer's check is returned, the verification service compensates the merchant for the amount and associated bank fees. Collection and recouping of unpaid funds then becomes the responsibility of the verification service which then acts similarly to a collection agency.