While some may see checks as a payment method of the past, it doesn’t change the fact that each year nearly $25 trillion worth of value is exchanged via the traditional “promise to pay.” But Ingo Money is a payments player that seeks to turn the lowly paper check into a digital touch point that allows access to good funds instantly. Ingo’s CEO Drew Edwards sat down with MPD CEO Karen Webster to how they make paper checks faster and safer – and an on ramp to digital commerce.
Lots and lots of people still get checks, as evidenced by the $25 trillion of value exchanged by one of the oldest payments methods in the world. And these checks are often a secondary or tertiary source of income for many, now considered part of the “freelance” society – people who pick up extra money doing a variety of odd jobs on the weekends or after work.
But as helpful as getting that supplemental income is, getting access to those funds is painful. Consumers expect – and need – money quickly. Going to check cashers, which is what many people do, is anything but fast. Delayed deposits or checks that bounce can also result in a very painful domino effect on a person’s personal financial situation.
Combine that with the lack of a standardized way for consumers and small businesses to receive electronic payments and you have a marketplace where checks are still thriving – but pain points remain.
[bctt tweet=”Paper check transactions account for nearly $25 trillion a year in the U.S. “]
Drew Edwards, the CEO of Ingo Money is focused on solving the two biggest pain points from the standpoint of those on the receiving ends of those checks: making sure that the funds are good and that access to those good funds is done in a timely manner.
“What we are focused on is trying to take the risk and the timing gap out of the deposit right now. We sometimes say the traditional deposit is so yesterday. Instant is required.”
Ingo Money’s proposition is that consumers who want their money instantly will be willing to pay a small fee to have the funds promised to them via checks made available to them instantly.
And 96 percent of them do.
According to Edwards, the majority of the 400,000 consumers using the Ingo Money network pay to receive their money instantly, while 4 percent choose to wait a bit longer to gain access to their funds without paying a fee.
These fees are based on the degree of risk that Ingo Money is taking to make funds available to the receiver and vary by type of check. Government checks – the least risky – carry the lowest fees; those from a consumer to another consumer carry the highest. Those who don’t wish to pay the fee can get their money in 10 days with no fee at all.
"Depending on which payment instruments you’re talking about there are varying levels risk associated with them. At one end there is a traditional wire transfer, where if consumers pay the $25 fee and you get confirmation then it’s done, it’s irreversibly deposited into the receiver’s bank account right away. At the other end of the spectrum is $25 trillion worth of checks a year, which can bounce six months later,” Edwards pointed out.
More recently, Ingo Money is exploring how to use checks to onboard digital banking relationships with consumers using prepaid cards.
A recent partnership with NetSpend, a company that Edwards describes as having “a ground zero perspective on consumers who use check cashers,” is allowing Ingo Money to enable financial access and convenience to an entirely new consumer base – not only ensuring that good funds are available to those consumers, but more of that money gets deposited into their accounts.
"It’s now possible through the NetSpend mobile apps, to change that game for consumers and retail partners by collapsing two transactions. What was once a check cashing transaction and then loading those funds onto a prepaid card, is now a single transaction that can be done from the convenience of their home,” Edwards added.
Edwards describes Ingo Money’s innovation as one that is focused on the “other side” of the payments transaction. He explained that although there are many digital options in the market aimed at making the movement of payments between people easier, such as Square Cash and PayPal, the focus is shifting on the movement of money inbound.
One common misconception is the direct depositing of checks helps to fill the void, but, Edwards pointed out, nearly 70 to 80 percent of U.S. consumers are not utilizing direct deposit because they either don’t have access to it or it doesn’t suit their needs.
"For consumers with other sources of income, whether it is refunds, oddball checks or if they are working another job, the direct deposit piece kind of left them with one foot in the door and one foot out,” Edwards noted.
"What we are doing is trying to solve this problem for everybody out there, whereas direct deposit just solved it for the guy with a traditional job, a stable employer with only one source of income and easy access to direct deposit."
While the check remains a resilient mainstay in the payments landscape, the move toward digital payments is unwavering.
But Edwards said the key to moving more consumers toward electronic payment methods over checks involves presenting a need for the behavior shift.
"You’ve got to have some reason for the consumer to go adopt an electronic wallet or mechanism in order to change what was a working behavior for them. Just like PayPal exists today not because it’s the coolest app, but because this marketplace eBay predominately created a pain point in consumers wanting to sell something online but having to receive payments from someone you don’t know,” Edwards said.
[bctt tweet=”To change a behavior that’s working, consumers need a real reason to adopt new electronic payment methods”]
In that same way, Ingo Money is tapping into a way to address the pressing pain points associated with cashing checks.
"These transactions can wreak havoc on consumer accounts when checks are returned or when the bank holds the money. But we can solve it, and once we solve it we can begin to give them those other options that are much more efficient.”