Today's episode is part 2 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.
Missed the first episode? No worries! Check it out here!
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.
Can you explain how CheckAlt assists its customers and implementing a successful strategy to convert all of those smaller paper checks into electronic payments?
Sure. So again, the payment is somebody deciding that they're going to pay a vendor. So you have a payer, you have a vendor, or a biller, or a payee, and they're making a choice about how they pay. So a lot of times an organization will already have a portal. They'll already have a way that somebody can access and get information. Think about property management. Think about a company that is working with homeowners associations. In fact, there might be a company that literally provides software to 500 homeowners associations. And interestingly, each one of these homeowners associations may not be that big. I live in a neighborhood in south Georgia. There's probably, I don't know... 35 or 40 houses in that little, just two streets, but it's got its own homeowner association, and you pay these dues. It may not be much; $75 a year or whatever.
So there's already a portal for that company to provide those services to the homeowner's association, and you know how those people pay? They write a check, they put a check in the envelope, and they get it down to Shirley or Bill, or whoever is the local person, right, who's collecting all of those. Now instead, CheckAlt says, hey homeowners association, you can just have a link right here, and everyone could just simply go in, open up the link, and they can simply do an ACH, which has the exact identical effect of having that $50 debited from their account, or they can pay by debit card, or they can pay by credit card. And so just by empowering those companies to provide as a part of their own services, how electronic payments can take the place of a paper payment. That's part of the strategy.
The other thing that we do is somebody says they've got their own portal. They've already got the ability to acquire information about the payment, but they're not actually executing the payment. So they've got their own front end. They've got their own API to gather the information, and now they're using an API on the backend with CheckAlt, where we're actually doing all the work behind the scenes to actually power and make all of those payments. If it's ACH, create the ACH files. If it's credit card interface with the card networks and gateways and all of that. So this is what makes what we're doing so powerful, is somebody needs a complete and total branded, we provide the whole front end, and it's a standalone URL and they put their name on it. CheckAlt provides that.
Somebody wants to send out an email, and just have a link where somebody could click on the link and be able to pay their bill electronically, and when that link goes, it takes them to a UI which allows them to put all their information, branded that entity, but CheckAlt's powering it on the back end. Somebody's got their own front end. They just want to power this on the backend; CheckAlt has that. Across the entire spectrum of the ways that people would want to power the electronification of a payment that might ordinarily have gone through a paper-based check, or just organic standalone, just straight up this is the way that we want to offer it, we're not even allowing people to do checks, but they can pay by ACH, they can pay by debit card or credit card. CheckAlt is powering those things for both direct entities, as well as channel partners, like financial institutions who are providing those services to their downstream businesses.
So CheckAlt and NXTsoft just signed a partnership that we're very excited about. We love all of our partners, but I know that we're very excited about the partnership with you guys. Can you explain why you chose NXTsoft to be an integration partner?
Absolutely. NXTsoft is really doing something revolutionary, and NXTsoft to me is like in the Douglas Adams, Hitchhiker's Guide to the Galaxy. Now I get it that many of your listeners may not know that book, but I encourage you to look this up. But in that story, he was talking about that there was this thing called the Babel fish and you could stick it in your ear and no matter where you went in the universe, whoever was speaking a language, would automatically translate it so that you hear it in your brain, in the language of your understanding. And if you think about it, if we actually had such a device, that would be really cool. The idea that a universal translator.
And at least it might be a silly example, but what I see in NXTsoft is they're basically saying, at the end of the day, everybody's got to get access to these cores. And you're trying to do... This company is trying to get access to core because simply, they need to know what the customer's available balance is. This one needs access to the core because they need to be able to memo post a transaction. Whatever the reason is that you might need to get to a core, literally hundreds and hundreds of FinTechs, like CheckAlt, all are trying to go out and say, oh we want to provide services [inaudible 00:05:27], okay, well I have Fiserv's DNA core, or I have Jack Henry's CIF 20/20; so on and so forth. So now if I want to do something that touches that core, as CheckAlt, do I have to go out and create six interfaces for FIS, eight interfaces for Fiserv, four interfaces for Jack Henry, and then there's DCI, CSI, COCC, and on and on and on.
And who knows how many little small mom and pop self, little local service [inaudible 00:05:57]. That is a very daunting task for a FinTech to have to go very broadly across all these cores. And here comes NXTsoft, and NXTsoft simply says, you work with us and as you have needs that you want to be able to reach and touch these, we're going to give you a way of interfacing with us, and just like Douglas Adams' Babel fish, we're going to go out and we're going to communicate to the core, interact with it in a way appropriate to what you're trying to do, and return back acknowledgements, or a job completed, or data such as your application needs.
And the ability for NXTsoft to do that and do it in the elegant way that it does it, is powerful beyond any measure of what the alternative effort and costs would be. It is really special. It's an integral part of what we're doing with CheckAlt, and quite frankly, we're just scratching the surface. We're just beginning the early stages of reaping the benefits of that NXTsoft integration. I can only imagine that the fullness of that over time as we really ramp it up, and as NXTsoft continues to improve all the things that it's doing, I see this as a powerful, powerful partnership that's going to last for many, many years.
And in marketing, like I am, you're always trying to think of new ways to visually represent what your company stands for and essentially does. The Babel fish is a perfect analogy of what our API connectors do for our partners, and how they help to break through that language barrier. We're so excited for this partnership with CheckAlt and we can't wait to show everyone what we have in store for the future of FinTech.
We are excited about it.
With all of your extensive knowledge in the payment industry and what's happening right now, could you talk a little bit about the payment landscape for this year after the crazy year that we just had, and what you see happening in the future?
So we're 2021 as this podcast is being recorded, and there are a number of initiatives that are happening now specifically related to this term faster payments. And it's interesting Amy, that we talk about faster payments, and yet we already have some things that are faster payments. So checks actually process a lot faster than they used to, and we have things like PayPal, and Venmo, and Zelle. And of course, there's this new thing that's relatively young in its life cycle called RTP from The Clearing House. And this truly is a new form of payment. And they're just really doing the marketing and a lot of the largest financial institutions have rolled it out. And so it does pretend to be something that would have a particular application, I think, in the B2B space. So is RTP going to cannibalize and take away check-related business? Perhaps. I think that's certainly their marketing plan; their lifecycle rollout of that is that it would.
I think it's more likely that it is going to be used at least initially to replace wires. So you think about what happens when a big company needs to send a million dollars today from one company to another, and it has to be there right away. You wind up sending a wire. And so long term, if you had another way where literally it was a payment that you could execute and the credit was received just a few seconds later, that would be the equivalent of a wire. And certainly, that's what RTP pretends to be, and they are also adding some great features in there about passing along remittance information, which is super important, as well as the credit.
Now, the Federal Reserve has something they've announced called FedNow. It's not going to be out until 2023 or 2024, depending on who you ask, but it will be very similar. It has very similar attributes to the RTP environment. As I think about this, and we talk about faster payments, those RTP and FedNow aren't really faster payments, they're instant payments. Something that literally when you execute it, I mean it's done. It's actually settled. Money's in the other account in two seconds. So there are many applications where that is something that absolutely has to happen, but the vast majority of the applications, or let's call them the use cases of a payment's mechanism, don't have to be settled that fast.
So there's instant payments, real-time payments, and then there's fast enough payments. So what I think we're going to see in the next year, two years, three years, five years... You're going to see some additional payments come out that allows somebody to push a credit to any other individual who has a bank account in the United States. You don't have to have the same map, you don't have to know who that person is.
If you go to a garage sale and you see this really nice Takamine guitar that you know is probably worth $1,500, and they're asking $750 for it, but you don't have $750 cash, then you get into this whole dance of will you take a check? No it's out of state. I don't know who you are. Okay, no I don't have PayPal. Do you use that? No, I don't. And there's this whole crazy thing about, well here, you've got to load the app so I can give you money. It's like, wait a second. All I need to do is have that person that owns the guitar to look at their mobile banking and see that $750 showed up. And if they got $750 in their account, here; they'll let go of the guitar and you can walk away with it.
So there are the kinds of payments we have now. Same-Day ACH is probably vastly underutilized. There are a lot more applications for Same Day ACH that should be mined. And there are some applications for this instant, real-time payments, like RTP and FedNow. In between, there are fast enough payments. And so I think you're going to see perhaps multiple fast enough payments that actually will wind up getting a lot of adoption, particularly by consumers who need to transact with somebody who needs to know that they're going to get the money but doesn't really care whether I have this app, or that app, or whatever. Look at my phone. Did money show up in my account? Okay, then the transaction's over.
So that's something that I think the NXTsoft podcast listeners can look for, and especially when you're talking to a vendor and they talk about faster payments, ask a question. Well, how fast is faster? How fast is fast enough? Is instant or real time so fast that it's really expensive? Well, what do I do if it doesn't have to be that fast? I think these are important questions, particularly for FI's to ask, because they're being bombarded. Particularly a lot of community banks, with oh you've got to do this. If you're not on top of this, you're going to be behind, and so forth. At the end of the day, ask a few questions, and if vendors you're talking to can't intelligently answer those questions, then maybe you should look for other vendors who maybe can offer a better, more cogent argument about just how fast faster payments need to be.