For all the talk by companies about how adopting electronic-payment technologies will streamline their accounts-payable processes, paper checks remain a staple of the business-to-business world. Businesses cut 13.1 billion checks a year, according to check printer Deluxe Corp.
To join the advantages of electronic processing with those of paper checks, Shoreview, Minn.-based Deluxe has hit on a hybrid solution that allows companies to securely send an electronic check by email without changing their accounting software or accounts-payable processes.
Deluxe’s eCheck technology, which the company acquired in 2015, allows businesses to create an electronic check by filling out the name of the recipient, the amount. and date of payment. Next, the payor generates a tokenized link to the echeck, which is stored on Deluxe’s secure server, and sends the link to the payee by email. Upon receipt, the payee clicks on the link and is connected to the echeck. The payee then prints out the check and deposits it. No bank-account information or image of the check is included in the email.
Deluxe is marketing the technology to large enterprises in the health-care, insurance, and brokerage sectors that make B2B and business-to-consumer payments. The company is also targeting small businesses.Usage is growing. In 2016, companies using Deluxe’s eCheck technology generated $2.4 billion in check payments, compared to $1.1 billion in 2015. Deluxe counts 4.6 million business customers.
“A lot of accounts-payable workflows are built around issuing paper checks, so there is lot of friction to changing them,” Vijay Balakrishnan, vice president of e-payments for Deluxe, tells Digital Transactions News. “Because Deluxe eCheck sends payees a link to an echeck that renders to paper and can be deposited, as opposed to an electronic image of a check, payors don’t have to change their back-end accounting systems to accommodate our technology.”
It can cost between $3 and $8 to generate and mail a single paper check, Balakrishnan says. By contrast, it costs less than 50 cents, in bulk, to create a Deluxe eCheck. As with paper checks, businesses purchase a set amount of echecks for a fixed price. Pricing for Deluxe eChecks range from $30 for 50 echecks to $245 for 500 echecks.
“In addition to lowering the cost of paying with a check, we also make it possible for payees to receive payment the same day the check is issued, since it does not travel by mail,” Balakrishnan says. “Payees receive faster payment and payors can more efficiently manage their payment schedule by paying a bill on the due date if they choose.”
Payors can also include remittance information with an echeck to make accounts receivable less complicated, Balakrishnan says.
To protect against fraud, banks can validate the authenticity of the check by scanning a two-dimension bar code on the printed check. Doing so allows banks to access Deluxe’s database containing all the correct check details, such as the amount and name of payee on the printed check, against the original echeck stored on Deluxe’s server to ensure the printed check has not been altered.
Alternatively, banks can connect to the validation Web page by manually entering the address of the validation Web page, which is included on the printed check, into their browser. That allows them to compare the information on the printed check being deposited against the original. In addition, payors can designate which employees have access to their eCheck account and what functions they can perform within the account, such as create, review, or sign checks.
“Deluxe is targeting the right audience with this technology, because checks are not going away in those market segments,” says Nancy Atkinson, principal and founder of Pittsburgh-based GTB Consulting and a former Aite Group analyst. “Their solution addresses many of the issues associated with electronic payments in the B2B world and lowers the cost of issuing a paper check.”