A person could readily go broke betting against the demise of the check. While there are at any given moment plenty of startups and fintech veterans looking for new ways to avoid writing checks, the data suggests that people (and businesses) aren’t going to stop writing checks any time soon.
This is one of the reasons why we thought it would be a great idea to get in touch with Paul Doyle, CEO of VerifyValid. VerifyValid is a leader in the movement to bring checks into the 21st century.
Finovate: Your relationship with Deluxe is a big deal. Can you tell us more about how that partnership came about?
Paul Doyle: Deluxe’s name is synonymous with the check. Having the biggest name in checks decide to resell your solution to their more than 4.5 million small business customers and selling through their more than 5,400 financial institutions is a big deal.
We at VerifyValid wanted a partner that could give us reach and whose brand completely aligned with the type of payment we enable … the check! Deluxe was an obvious answer.
How and where did it all happen? We have been long-time participants in industry initiatives, such as standards development through X9 and ISO, as well as newer initiatives such as the Remittance Coalition. When one works among industry peers at this level, the industry becomes a fairly small and well-connected universe.
Finovate: What are some of the other companies and institutions that have deployed VerifyValid’s technology?
Doyle: VerifyValid has over 10,000 users currently and more are joining every single day. Our customers run the gambit from several large companies such as $10B multi-national corporations down to sole proprietors and not-for-profits. Many of our customers are private sector, but we are getting an increasing number of public sector entities, such as school districts and municipalities, beginning to use the service.
Finovate: How big is the B2B check business right now? Amid the overall declining use of checks, are we still seeing strong numbers on check issuance in the B2B space?
Doyle: There are approximately 5 billion B2B checks written and another 3 billion B2C checks written. This means businesses will write roughly 8 billion checks in 2014. Given the average value of a check is $1,420, this translates to more than $11 trillion dollars disbursed via checks by businesses. Given all forms of cards combined still only add up to about $4.5 trillion, we think this is still a very big and important part of our payments marketplace.
Finovate: What kind of cost savings are your customers realizing by using VerifyValid?
Doyle: Customers can pay for using VerifyValid’s service using money they already have in their existing budgets. For the same price as a 1st Class postage stamp, a user can complete the full process of creating, authorizing, and sending an eCheck.
As a result, all the other costs associated with the payments (i.e., purchasing of check stock, special printer cartridges, labor, etc.) go away. Our customers tell us they save $1 per transaction for each use of the service that would have formerly been a hard-copy check sent via the US Mail.
Finovate: Let’s talk about the technology, the Trusted Time Stamp that keeps the check delivery system secure. What kind of authentication is happening here that ensures that a check a bank receives is legitimate?
Doyle: This can get VERY geeky very fast, so I will try to keep it simple, and high-level.
We have built and brought to market the industry’s first Universal Positive Pay system, which gives a bank-of-first-deposit (BOFD) that ability to verify that a check which was issued through our service or registered with our service is a true, authentic item.
The beautiful thing about the check is that the real value of the check is in the data of the check, not the paper. There are 5 critical pieces of information: 1) the bank routing and transit number, 2) the account number, 3) the check number, 4) the amount of the check, 5) the “Pay to the order of” or payee. We give the ability to prove the truth of authentic transactions. This is a big deal. It is a game changer when it comes to the problem of check fraud because now, through VerifyValid, banks can trap inauthentic checks before they even enter the banking ecosystem.
VerifyValid takes the 5 critical values and creates a cryptographic times tap or Trusted Time Stamp (per ASC X9.95). The cryptographic timestamp allows for us to prove the authenticity of the transaction while still preserving the privacy of the underlying financial transaction.
Finovate: What percentage of VerifyValid customers are printing out the electronic checks? Do you expect this percentage to change significantly going forward? If so, what would be the catalyst for that change?
Doyle: The vast majority of our customers are printing out the checks they receive and depositing them traditionally. While we do see this changing in the future, the nice thing is that it does not have to change before more people can take advantage of the service. We hear from customers their delight at receiving their payments faster. This, in and of itself, is a big benefit. When we talk to users and the opportunity to deposit the check electronically, this takes things to a whole new level. It surprises and delights. Most people say things like, “Wow … now that is great … you’ve got it all. That is cool!”
Finovate: Where do VerifyValid’s revenues come from?
Doyle: VerifyValid’s revenues primarily come from the business check writer. A business pays to issue checks and the cost of using the service is essentially equal to the cost of the 1st class postage that they no longer need to use.
Finovate: So VerifyValid’s approach to electronic checks keeps banks in the picture?
Doyle: VerifyValid’s approach is built around banks and credit unions. The check is a payment instrument drawn against a DDA and is the essential domain of the banking industry. We believe this is the right way to build a modern, next-generation payments capability: by working with and through the banks and credit unions, and constructed on a rock-solid foundation of an existing, trusted and effective payment system. We allow banks and credit unions to use what they already have, what they already own. No new IT spend or investment required.
Finovate: The option to deposit checks directly into your checking account is a key feature. How many participating banks/FIs do you have? How quickly can you grow that number?
Doyle: My team is working out a plan to open up deposit-ability and Deposit Services for all banks by the end of the year. Stand by for more details on this in the 4th quarter.
Finovate: Let’s talk about the new app, Mobile Checkbook. How is it being talked about and received so far?
Doyle: Customers and pundits seem to love our mobile checkbook. As the market’s first real general purpose checkbook for the smartphone, it has a wide variety of uses. We are also being asked for a number of additional features. This shows us how much customers already like and use the app, and what more they want to be able to do. This also shows how relevant and useful checks still are.
Finovate: Brett King of Moven famously predicted that the last personal check will be written in the US in 2018. Interestingly, an initiative in the UK that set out to sunset paper checks around the same time as King’s prediction was met with a popular backlash.
As an innovator in the space, what do you see as the future of the check?
Doyle: I believe Brett’s prediction is simply wrong and may have been meant to hype his company’s marketing message. The data in the US tells a different story, as do the direct experiences of the UK.
In the US, the actual number of checks written in 2012 as compared to nine years earlier in 2003 was 56% of the earlier volume. There were 21 billion checks written in 2012 as compared to 37.6 billion written in 2003. At this rate, if we look at 2018 (which would be a 6-year difference as compared to a 9-year difference in the prior number) one could predict that in 2018 there will still be approximately 12 billion traditional, paper checks written. Ironically, the number of consumer-to-consumer checks written has grown approximately 2% over the prior 6 years (2006-2012).
The experience of the UK is also worth noting. The UK Payments Council
tried to mandate the end of checks by October 2018. Then, in July of 2012, this mandate was abandoned. The UK Payments Council was criticized for having attempted to implement a mandate without coming up with an acceptable alternative to the check.
According to mobilepaymentstoday:
“Checks still play an important part in the British payments landscape. Nearly 840 billion pounds ($1.4 trillion) worth of checks were processed in 2013 accounting for 10% of all payments made by individuals. In 2013, 23 million checks were sent as gifts because they are still the most trusted method of sending money through the post.”
We believe the check is as good a form of payment or better than anything else out there today. If one removes the paper or shifts where an dhow the item gets printed, we think the check will see a very long future. My prediction is that the VerifyValid eCheck will help checks continue to be used for at least the next decade or two. I believe we will see eCheck volumes reverse the trend in paper checks and will ultimately result in an increase in check usage.
Finovate: What can we expect to see from VerifyValid in the second half of 2014?
Doyle: The second half of 2014 is going to be exciting
- Significant expansion of our mobile offering
- Expansion of our offerings on the security and fraud prevention side of the business
- Enhanced experience, functionality, and services for banks
And a few things we cannot talk about just yet!
Fiserv and DBS