By Allison Murray, Executive Vice President, Business Development
Financial institutions really want us to be a partner in disruptive technology. I attend a lot of conferences in the disruptive space, and bankers as well as credit union executives tell me that they are experiencing interloping companies, such as Apple, Amazon and other players, trying to take away customers by offering a host of alternative financial services. They are entering these markets, but are causing great disruption and upheaval in the process.
We’re here to help banks and credit unions stay on the right side of invention and compete along with these disrupters rather than die out.
One of our innovative products is CheckAlt eChecks, a solution that leverages Check 21 technology rather than ACH, to provide faster and more transparent payments. eCheck payments sent via ACH can take up to three to five days to settle and are subject to strict item limits and thresholds set by the National Automated Clearing House Association.
However, eChecks sent via Check 21 are presented directly to the depository institution and offer fund availability in as few as 12 hours. Additionally, Check 21 eChecks are not governed by NACHA and therefore do not face the same restrictions – instead, custom item limits and thresholds can be set by the institution.
Our eCheck product is an API-based solution, which captures payment data from a front-end website and converts it to a digital front and back image of a check. One of the unique features of our product is its ability to include up to six additional lines of data, such as invoice numbers, customer IDs, transaction IDs, etc., in the memo field of the eCheck image. We also have the ability to include an electronic signature. These features are important because the check image will appear on the payor’s bank statement, as opposed to an alphanumeric non-descript line of data that would appear for an ACH transaction, so the payor (and the bank) will know exactly what the payment was for.
CheckAlt eChecks can be white-labeled by banks and credit unions and offered to business customers as a faster, more cost-effective payment alternative. Financial institutions can also use CheckAlt eChecks to collect loan, mortgage, credit card and other payments from their customers. Our eChecks can also be used by businesses directly.
We are very proud that clients are finding innovative ways to use our products. Indeed, Payoneer, a global leader in cross-border payments, is one company now using CheckAlt’s eCheck solution to improve the speed by which it credits funds between business owners and professionals who are sending and receiving payments.
Our approach not only means faster and less-expensive clearing, but also potentially fewer charge backs, simplified regulation and compliance. CheckAlt’s eCheck API easily integrates into existing websites, as well as desktop and mobile applications.
We truly believe Check 21 is the future of online payments. Our Check21 eCheck solution is just one more way we can be an innovative partner for financial institutions, helping banks and credit unions better compete by being on the forefront of invention.
By Robert MacMahon, Executive Vice President, Business Development & Channel Management
By now, practically every traditional bank or credit union understands that they have to find ways to either compete with or embrace FinTech to attract and keep customers.
But it’s not just about retail customers, particularly Millennials who have been bred to expect that technology should meet just about every demand at their fingertips.
FinTech firms also have their eye on business customers, including a plethora of alternative financial services startups backed by investors and venture capitalists, lending money to small businesses that traditional institutions turn down – small businesses who then leave those institutions for good.
How can a traditional bank or credit union compete? By being even more of a full-service institution and providing as many products and services to make commercial customers’ lives easier, particularly using the mobile channel.
This not only means offering mobile merchant services and treasury management solutions such as remote cash deposit services, Check 21 compliant check images, expedited payments and interconnected vaults at merchant locations, but also an increasing array of cloud-based solutions such as invoice presentment, advanced online payables, account management, taxes, payroll and other human resource solutions that more businesses – particularly small and micro-businesses like lawn care services and dog walkers – would love to have at the tip of their fingers.
Traditional banks and credit unions can even capitalize on the alternative lending movement – you name it – institutions can leverage any FinTech solution that a business customer could possibly need.
But how can institutions below the top 30 money center banks and large regionals — institutions with limited resources — offer solutions like that?
Let’s just look at one example at how challenging adopting FinTech solutions on a piecemeal basis can be for one of those institutions: offering a mobile app for remote deposit capture. It’s seemingly a relatively simple app to offer, but to get that solution to market, an institution typically has to rely on its core processor to allow a third-party app developer to connect its solution to the core system. However, most core vendors do not want to open up their systems in real time for posting those deposits because they don’t want the third-party assessing the core — that’s a problem.
Then an institution has to figure out how to handle potential security issues that remote deposit capture poses. For example, a fraudster could take a picture of a fake check, or take a picture and deposit a real check remotely, but then immediately try to cash the check at the institution’s branch or at another institution. That’s another challenge.
Suppose an institution decides to just work with a third-party app provider, but then there are issues importing images, and upgrades not being delivered. On top of that, an institution has so much already on its plate, that it can’t even imagine also handling sales and marketing of these third-party apps.
This example pales in comparison with what a bank or credit union has to do to provide solutions to commercial customers. While an institution’s niche may be primarily banking merchants and corporate entities, its focus may really be just on commercial lending. However, to increase the stickiness of commercial customers, institutions should strongly consider offering a much fuller array of products, and those solutions must be cloud-based and easily accessible via mobile.
Therein lies the most daunting challenge of all: contending with the financial industry’s own version of the Four Horsemen of the Apocalypse — operations, compliance, IT and sales. If institutions try to launch these solutions on their own, or in partnership with FinTech vendors for each separate solution, handling the due diligence for those Four Horsemen make such endeavors extremely tough.
That’s where we come in.
We like to call ourselves the “outsourced innovation lab,” a firm that can be a full-service outsourcing partner for institutions, helping them implement an ever-broadening array of solutions by a cadre of FinTech vendors that are either part of our portfolio of companies or trusted partners. Solutions that go well beyond the typical merchant and treasury management offerings – solutions that can make an institution truly full-service.
We want our financial institution clients to drive the implementation strategy. We sit down with our clients, taking the time to truly get a feel for where they want to go long term, which industry verticals fit well with their strategy, which target markets they want to focus on and which solutions they want to offer that we, our portfolio companies, or partners can then build out.
We also like to call ourselves a concierge service, because we are experts in helping our clients implement solutions while keeping the necessary due diligence of those Four Horsemen – operations, compliance, IT and sales.
We not only have partners that can produce either white-label off-the-shelf solutions or build customized solutions, but we can also go far beyond typical marketing and training support: We have experts who are just a phone call away from helping sales personnel answer complicated questions posed by prospects in the field, or the experts can even accompany them on the sales call to help close the deal.
We have a client-oriented approach: it’s all about service and support to institutions that have limited resources and may not want complicated systems. Many of our client institutions don’t serve large or medium companies, but instead focus on sole proprietors or outfits with just one or two principals, and they really only need low cost-of-entry, simplified solutions. They might not even need co-branding – perhaps they just prefer something right out of the box to satisfy 75% of their business needs.
The last piece of our business model: We aim to provide our clients with a predictable margin for each solution below what a company would have to pay in the open market from a provider directly for that solution.
We aim to give our clients an interest-free income revenue stream, in a way that is easily quantifiable. With our concierge outsourcing services, our clients won’t have to offer FinTech solutions as loss leaders – they won’t have to try to fight for something by cutting the price down to bare minimum or sell it at a loss.
We aim to help our clients successfully compete in the new world so they can attract and retain more business customers, in ways that can also greatly boost their own bottom line, without having to add staff or dedicate already thin resources.