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CoverStory
Checks are dead – again?
There is a camp in the payments industry that would have ISOs and MLSs
believe checks are dead, or at least dying a slow death. But according to the
2007 Federal Reserve Payments Study, which was based on findings from the
2007 Electronic Payments Study conducted by Dove Consulting, the numbers
do not support concluding that the end of checks is near.
Noncash payment transactions in the United States in 2006 totaled 93.3 billion,
with a value of $75.8 trillion. There were 62.7 billion electronic payments versus
30.6 billion checks paid. Checks accounted for 33 percent of noncash payments.
Electronic payments – including signature, PIN-debit and credit card,
ACH (including BOC and electronic funds transfer), and electronic benefits
transfer – accounted for $34.1 trillion.
However, though check volumes decreased 18 percent between 2003 and 2006,
the amount of money paid via checks increased from $39.3 trillion to $41.7 trillion
during the same time. Most corporate and B2B payments are still paper
based and, according to the Fed, "although check volume is clearly on the
decline, it will also likely have a long tail and need to be supported for many
years to come."
The next big thing
Previously, without an appropriate payment acceptance product, ISOs and
MLSs were locked out of B2B check payment opportunities. RDC provides
them the opportunity to package an additional form of check acceptance with
card solutions. And checks are expected to remain an important part of small
business transactions. Industry analysts
predict a 20 percent increase in
RDC for FIs by the end of 2008.
"Checks represent more than 75 percent
of total receivables for over
two-thirds of small businesses," said
Bob Meara, Senior Analyst with
Celent LLC, an FI research and
advisory firm.
"A terrific opportunity for RDC
exists among the 20 million businesses
with annual revenues of less
than $1 million. New, low-cost scanners
coupled with thin client [Webbased]
applications will open up a
whole new market."
Jerry Federico, National Sales
Director for Enterprise Payments at
ProfitStars Inc., a Jack Henry and
Associates Inc. company, feels FIs are
not the most aggressive marketers
and have neither the resources, the
motivation nor the skill sets to take
that product to the street.
"The ISOs are the trusted advisors to
millions of small businesses because
they offer superior reporting capabilities
and services," he said. "There
is a perception that all RDC products
are the same, but this is not so.
"Many subtle differences exist
between product suites, and this is
where the ISOs really need to do
their homework and decide which
solutions are best suited to a particular
small business."
Modern-day gold rush
"Remote deposit offers three things
salespeople love to hear," said
Michael Pratt, Chief Marketing
Officer for Panini North America Inc.
"There is built-in market demand
for this product; it instantly reduces
transportation, operational and labor
costs; and with over 24 million businesses
in the U.S. and only 400,000
RDC units deployed, it's an ISO's
ideal dream state."
Pratt's biggest concern is that solutions
are not being offered and
deployed fast enough to businesses
that want them.