Today's episode is part 1 of a 2 part series with David Peterson, Chief Strategy Officer, for CheckAlt. David talks about the "renaissance" of the paper check, how CheckAlt is helping their clients make electronic payments easier and what's in store for 2021 and beyond. Listen below!
About CheckAlt -In the past 10 years, CheckAlt has become the leading provider of deposit imaging and treasury management solutions for hundreds of financial institutions across the country. CheckAlt is focused on processing check payments while also eliminating paper from the system by providing digital payment tools for all payment methods and channels using a robust suite of APIs. CheckAlt’s solutions include lockbox services though a nationwide hub-and-spoke network of processing sites, consolidated item processing, integrated receivables, and mobile capture. CheckAlt is headquartered in Los Angeles, Calif. For more information, please visit https://www.checkalt.com.
David Peterson, Chief Strategy Officer, CheckAlt - David is an eBanking pioneer, with 38 years as an entrepreneur and content expert on electronic banking and payments. David’s focus is on expanding CheckAlt’s robust options for assisting financial institutions with deposit automation and billers with acquiring and posting traditional payments.
As a seasoned entrepreneur and thought leader, he is frequently published in regional and national publications on a wide range of electronic banking, innovation and strategic thinking topics. David previously served as President of U.S. Dataworks, a CheckAlt Company, which focuses on, advanced payment processing. He also founded Goldleaf Technologies, a leading provider of electronic payments software, correspondent banking and online banking services to independent financial institutions, where he was instrumental in establishing electronic banking and payment systems for commercial banks both in the U.S. as well as throughout Latin America and the Caribbean.
David also previously served as Executive Vice President for Q2, a virtual branch software provider where he focused on enterprise-wide strategic initiatives, product direction and executive consulting. He remains active in U.S. payment and virtual banking initiatives, currently serving as Vice Chairman of PaymentsFirst, a regional payment association based in Atlanta Georgia, ArgosRisk, a business health tracking service provider, based in Minneapolis Minnesota, Citizens Community Bank of Valdosta GA and Softgiving, an Atlanta startup that is bringing new payment options to Donor Dependent Organizations.
Peterson’s passion is to assist individuals and businesses to think more creatively to spur innovation and enable good decision-making. In April 2016, Peterson authored Grounded, a management/leadership book providing insight on making good decisions in a crisis. When not participating on the leadership team at CheckAlt, performing virtual keynotes and workshops or sailing the Caribbean, he spends his off hours, golfing, fishing or playing the guitar.
Could you give us a high-level overview of your payment journey driving innovation and how it ultimately led you to CheckAlt?
So 38 years just means that I'm really old. Those of you that might see a picture associated with the podcast, you'll see this old guy and you'll go, "Well yeah, he looks like he's been in the industry for 38 years." But I have actually had an amazing journey working for multiple cores. Started off as a programmer, got into the ability to do training, and started educating individuals on electronic banking and payments. Then in 1990, I started a company called Goldleaf Technologies. That company came up with some amazing software, particularly helping community-based financials to [inaudible 00:01:44] solutions at a time when they were just starting to get their own FedLine terminals and starting to do more things on their own. Goldleaf software really helped them both in terms of internal processes, as well as how they were connecting their customers, consumers and businesses back to the financial institution, almost all of that pre-internet.
Then the internet came and we followed that along. Eventually, that company got sold to Jack Henry ProfitStars. Many of those Goldleaf people and Goldleaf products are still an active part of what Jack Henry is today. But I took the next 10 years and really focused on consulting, and speaking, and writing, and focusing on two very important things. One is the FinTech world of electronic banking and payments, and then more generally, innovation and how organizations can innovate and drive gross margin improvement through innovation.
So what brings me here now as Chief Strategy Officer of CheckAlt, we'll probably talk a little bit more about CheckAlt's role in the payments world, but I speak at graduate banking schools. I write feature articles. I have my own podcasts and blogs and so forth, all focused on trying to get people to understand how important it is when you think about consumers, but even more importantly, businesses, what drives their business is the ability to get a payment and get it posted to their accounts receivable. It's not sexy. It is perhaps one of the most boring things that a business does. But financial institutions should be in the business of figuring out how to best help those business customers do that because that's what will make them strategic.
So this is the primary focus of culmination of all of that 38 years, to say financial institutions are not in the transaction business. Financial institutions should be in the strategic business solutions business, and the big part of that is how they provide a systemic payments infrastructure ecosystem for those business customers.
Thanks, David. That was a really good overview of what CheckAlt does, and also gave us a little bit of your background within the payment industry. Speaking of payments, CheckAlt's Co-chair and CEO, Shai Stern describes your company as the house of payments. Could you tell our listeners what that means?
Yeah. Shai is an amazing individual and anyone who gets a chance to hear him talk should. But house of payments, when you think about that term, you're thinking about something that's sort of systemic. Like it's complete, it has all of the different elements. What's happened over the years is because of the advance of electronic payments, a lot of companies who traditionally provided paper-based, check based solutions, really all pivoted away from checks and other forms of traditional paper services, even the acquisition of a bill that's associated with a payment, and moved on towards electronic payments.
What CheckAlt has is something very, very unique. That is a systemic way of looking at the payment needs of each and every customer or financial institution partner that we have and say, "What is it that you or your business customers need?" Then being able to provide that very specifically, regardless of whether it's just a standard check and coupon that's coming in because somebody's making a utility payment. Or whether or not we're providing some type of electronic services such as the ability to offer a portal for somebody to make an electronic payment via ACH or credit card. Or even the ability that we have to go upstream and go to a bill payment provider and catch, get all of those items for small payments that they're making to many different vendors. Catch those, and we consolidate it and send it electronically to those companies which are our customers.
That broad reach across that whole systemic, and I'm, of course, Amy, leaving out a lot of pieces, but going from very, very traditional paper to the most advanced electronic. Even looking at some of the newer or faster payment things that are coming, that broad reach and being able to do so outsourced, being able to do so in sourced, being able to offer an API, if that's what they want to do is let us power their own front end, or they want to use our front end. From left to right, top to bottom, that house of payments says somebody has got a payment need. It fits into one of the two big categories of the problems we solve, and we have all of the different ways that can solve it that perfectly meets the needs of each of those customers.
The house of payments is definitely what you guys essentially are, which is really cool. Your business model includes traditional paper-based payments like checks and remittance documents. Many companies have long abandoned check processing. Can you tell us why this is a focus for CheckAlt now?
Yeah, so it is, as I was just sharing, because of that push, it's left a void. There's a vacuum of opportunities for check processing. There's really a couple of different ways that organizations did check processing. Maybe they were large enough to have their own operations. Think MediaComm, or AT&T, or the largest oil and gas companies in your area. They get ... Think back even just a few years. Maybe they were getting hundreds and hundreds of thousands of payments every week. So they probably had their own operations centers. Mail came in and they had big equipment and opening up the mail and handling exceptions. All of those things, they did it in-house. Or there are these service bureaus, these organizations that actually provide that service. Somebody would outsource to them and say, "Okay, the mail's not going to come to us." So when you get a bill, you look at it, and it says, P.O. Box Kansas City, Missouri, well, that's going to a lockbox where some other company is opening that mail and performing all the work.
As time has gone by, the number of total checks written in the United States has decreased. Go back to 1998. Maybe there were 55, 56 billion checks written. Now in the last year, just under 15 billion checks. That decrease has occurred across the entire industry. That company that used to get 250,000 checks a month, how many do they only get? 30,000 checks a month. So it's no longer cost-effective for them to have that huge infrastructure because of the total number of checks, but guess what? Those 25,000 checks, are really important. Those are just as important as when there were 250,000 checks.
So what CheckAlt does is it comes in and says, if you're looking to figure out how you're going to deal with your checks, some companies would say, "Well, we're just going to take all of that electronic." Well, that's not that easy because companies can't force people to pay electronic. They can incentivize them to pay electronic. So what CheckAlt does, says is we're going to take care of your checks. We're going to love it. We're going to bring him in. We're going to handle them with care. We're going to give you white glove concierge service and make sure that all of these checks get opened up, they get properly fixed. Anything, exceptions that have to happen to them, we're going to automatically handle that. We're going to wind up sending a posting file to your bank so you get a deposit same day. We're going to send a posting file to the business so they can register that all of those accounts paid, and now they have money in their account to go pay their bills, pay their people, grow their business.
By going in and doing that, and then having a plan subsequent to that to say, "Hey, you know what? It would be a great savings to you and you get your money faster if people weren't writing checks and they were paying electronic." So we want to go in and not say, "Oh, checks are bad. Oh, checks are so last Tuesday. Checks are awesome. We're going to handle them with great care, and then we're going to have a program to help you convert those into electronic payments." That strategy, that ability to bridge that gap where you don't go into a company and say, "Well, you should just do all electronic," easy to say. But the ability to actually provide a mechanism, a crawl walk run way for them to move from checks and get those remaining checks over to electronic, that's what I think is going to make the difference in terms of why CheckAlt is being used more and more by organizations. They look to us to provide that systemic house of payments options for them.
I can see how the idea of electronic payments is easier said than done. There's a lot of people out there that would just prefer to mail in a check to pay for their electric or their gas. It's great that CheckAlt takes care of that process, as well as electronic payments. In your last response, you mentioned a renaissance of check processing. Could you tell us what that means?
Yeah, so the renaissance really is just a term that makes you think back, of saying there's a time in which things were happening that were very different. For me, the renaissance is because of what I mentioned before about the reduction in the number of items. Now, organizations that ordinarily would have had these things done in their own shop are more willing to outsource. Also, and you think about what we just dealt with over the last 14, 15 months, right? All of a sudden, people very quickly went from a robust, having everyone in the office working, to everyone working from home. I was recently talking with a treasury officer from a fairly large company, and we were talking about this work at home. What did that mean for the whole accounting department? He said, "You know what, David? We were able to completely and totally pivot to virtual with the exception of somebody from my accounting department every day had to go in the office to get the mail, to open up the mail and process the payments that were coming in directly to us."
So what you've seen is, is because volumes have dropped now, and even let's think about this. In the early days of COVID, we weren't really sure how COVID was transmitting. So there were people who didn't even want to touch the mail. This is another [inaudible 00:12:06] that added to the idea that there are outsourcing options out there. Companies might come directly to CheckAlt and get services, but more likely, we're working with a financial institution partner. Then they're rolling this out to their best, most profitable business customers who need this.
Here's one of the really important points about the renaissance concept. Back in 1998, 55, 56 billion checks, the average dollar value of those checks, $526, right? Now last year, not quite 15 billion checks. What was that average dollar value? Well, surprisingly, it's over $2,600. So even though the number of checks has dramatically decreased, the pace at which it is decreasing is slowing, and then the average dollar value has gone way up. What does that mean? It simply means that the vast majority of those $40 billion checks driven out were consumer payments, small value consumer payments. Maybe, Amy or David paying somebody $50 by check to a niece, or nephew, or a friend, whatever. That now gets done by Venmo or PayPal, or some other mechanism, ACH debit card, whatever it is. What's left are a bunch of B2B payments.
So now when businesses are paying other businesses, it's a little bit harder for them just to make the leap to electronic because they have accounting systems. ERP systems are all tied back to a check number so that they can avoid fraud and keep track of all the payments that are being made in a systemic accounting environment. So it's harder for them just to say, "Okay, we're going to have everyone move over to electronic." If all of a sudden the number of total checks written has gone down, but the dollar value of those have gone greatly up, it's even more important for them to get quickly captured, securely processed, and then posted to their account in the same day so that those companies know that they have the money in the bank.
They have all of their accounts receivable posted, and they can concentrate on what they do best, whether that's be an energy company, healthcare, property management. Whatever they do, all of this stuff about payments isn't germane to how they actually operate their business. So the more we can take away from them all of these germane tasks that have to be done in order to get payments posted, they can now concentrate on their customers. They can increase the customer experience. They can create better products and services and so forth, so the win-win here is huge. So the Renaissance simply means other companies are moving away from checks. CheckAlt is embracing checks and saying, "We'll take them. We'll process them. We'll love them. We'll give them concierge level service, and we have the full suite of electronic payments to help you transition to that."
That makes a lot of sense to me. As a consumer, I can't even remember the last time I wrote an actual check. If I need to pay somebody, I typically use Venmo or Zelle, and I pay all my bills electronically, but I can see why a business who is sending payments for thousands of dollars would want that paper trail. It makes a lot of sense that the number of checks being written are decreasing, but the amount is increasing. So paper checks are actually more important than ever.
This episode of OmniTalk was sponsored by NXTsoft. NXTsoft is your all-in-one stop to help your company secure, connect, and optimize your data. Welcome to data done right. Thanks for listening to this week's episode of OmniTalk. To listen to the rest of my interview with CheckAlt's Chief Strategy Officer, David Peterson, tune in on June 7th. We'll go into more detail about electronic payments. We'll also talk about where David thinks the payment landscape is headed. As always, stay safe, stay well, and we'll see you next time.