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You definitely don't want anything that can be done over the internet. Probably your best bet would be something accessible via modem, using a secure, encrypted client and server architecture.

Let the big guys handle it in Washington DC headquarters. Big guys would be a credit card company as you suggest.

Then let the small guys get a piece of the action in the states with each state having ten private contractors who will securely hook into Wash DC and relay the results to employers

I'd put up a fight over using the government for this, however. Existing credit agencies could provide a primer for private businesses to handle this.

The Feds are sure to screw up such a computerized operation. It's imperative to farm it out to private business.

With massive fines in place and a huge number of employers looking for a reliable way to make sure they're not going to get slammed for hiring illegals, a whole new market for employee work rights verification could be created overnight.

Fines have to be large enough to deter employing illegal aliens so you can't get a leg up on your competition

"Then let the small guys get a piece of the action in the states with each state having ten private contractors who will securely hook into Wash DC and relay the results to employers"

There's no reason why this would have to be a single company. In fact, pushing this on a single company causes you to lose fault tolerance, and opens you up to fraud. If there are, say, 5 major companies who specialize in this, then the chances of faulty information or faulty corporate leadership causing disruption are minimized. Fault tolerance (both in terms of data fault and company availability/existence fault) would be crucial to acceptance of any such system. Obviously, if Corporation X has all the cards, and it later has massive financial problems, our options are limited to bailing out Corporation X with taxpayer dollars or watching the entire system collapse. With the fines in place, the free market will organize itself all on its own. The only thing we need from government is enforcement of the fines against those hiring illegals and regulations protecting the privacy of Americans.

"Fines have to be large enough to deter employing illegal aliens so you can't get a leg up on your competition"

I propose the fines be a percentage of the gross revenue for the company for the previous year. While this may seem unfair at first, the difference in size between companies can make a huge difference in the effectiveness of the fines. In other words, if we fine Joe's Tires $1 million, Joe's Tires is done. If we fine Walmart the same amount, it's likely they'll look for better ways to hide their illegal hirees, rather than be deterred. I think, perhaps, 5% of a company's gross revenue for the previous year should be sufficient to punish every company to the point that they'll think twice about hiring illegals. Joe's Tires takes a $10,000 hit for hiring an illegal, which damn near kills the business, and Walmart takes an enormous (I'm guessing tens of millions?) hit for hiring that same illegal. Joe's not going to be hiring any more illegals (lest he lose the business altogether), and Walmart's stockholders are going to start showing up at board meetings looking for blood.