Unlocking Paper Checks’ Potential With APIs

The paper check has a nasty reputation in B2B payments as a cumbersome, manual and risky payment rail. Yet data from the 2016 Association of Financial Professionals’ Electronic Payments Survey released last September actually found a 1 percent increase in corporates’ use of paper checks compared to two years ago.

For Jim Ballagh, VP of business development at corporate payments firm Ensenta, that’s not too surprising.

“Businesses have a lot of confidence in all of the information and all of the processes that may or may not be there with some newer [payment] methods,” he recently told PYMNTS, citing the “relative” speed with which payees can receive their funds, as well as the lack of interchange fee associated with accepting a check.

“Checks are declining,” he acknowledged, “but that decline isn’t as deep as it was. What we’re seeing, in the business area in particular, is that there is a very strong sage of checks.”

Much of the friction associated with paper checks falls on the shoulders of the payment recipient. With that in mind, Ballagh explained that newer technologies can actually help paper checks become safer and faster, without forcing businesses that pay in check change their behavior.

One of the largest technological developments that impacts check is remote deposit capture. Today, Ballagh said, RDC technology has advanced to make the process of accepting a check even more seamless.

Historically, businesses deployed RDC technology by integrating a desktop scanner into the workplace. The hardware can process both high and low volumes of checks, the executive explained, and automate at least some portion of the accounts receivable process by automating the capture of data on a paper check and sending that information to the bank.

But especially for smaller companies, a desktop piece of equipment no longer cuts it.

“What we’re seeing now is a strong demand for mobile RDC,” said Ballagh, adding that for a mobile RDC solution to really gain traction, it needs to have all the same capabilities of a desktop solution. “There are a wide variety of opportunities where you can take mobile business checks with your existing phone. There is a big advantage and opportunity there. You do not need to purchase a scanner and install it. Mobile presents new opportunities, particularly in the lower-volume merchant capture.”

API Steps In

The problem with the rise in mobile RDC technology is that companies deploy disparate tools across their desktop and mobile functions, creating a barrier to visibility when checks are received and scanned across devices.

According to Ballagh, that not only creates inefficiencies, it also expands a company’s chance of accepting a fraudulent check. It’s a major issue in B2B payments today. According to the AFP, 71 percent of businesses have experienced actual or attempted check fraud.

This is where API technology comes in.

“One of the issues with this approach [to RDC] is that there is no way at the point of presentment to engage some of the sophisticated risk mitigation tools that are available across those different channels,” Ballagh said. “The solution to that is more of an integrated approach, where mobile and desktop solutions share a common platform, with common risk policies at the point of presentment.”

“The way this is accomplished is having an API,” he noted.

An API that connects RDC tools across platforms — from mobile to desktop to kiosks at the bank branch — can not only enable a single view of paper checks received and being processed, but streamlines a company’s risk mitigation approach across channels. This leads to fewer transactions being reviewed and a more agile AR process, Ballagh explained.

As RDC technology progresses, it will continue to develop in the world of enterprise mobility, the executive said. And as APIs become more common in financial services, they will also begin to unlock the power of third-party services in RCD tools, like additional account verification solutions. These technologies ultimately enable a business to process a paper check payment faster — which, especially for SMEs, is critical.

“All of these things are important to small businesses in particular,” Ballagh said. “Small businesses often have a check in the mail — truly, that happens so much with small businesses. And it ends up that they go into an overdraft situation.”

Real-time risk mitigation and mobile RDC can ensure that an SME is able to accept that check as soon as it’s presented so they have access to those funds more quickly, he continued.

Paper checks may have their drawbacks, but they remain commonplace. When a supplier has no choice but to accept a check, they might as well deploy technologies like RDC to make a paper check as painless as possible to receive. The technology may even turn a paper check from a cumbersome technology into one that actually benefits both ends of a B2B transactions, the executive argued.

“There are a number of advantages to checks,” Ballagh concluded. “You can expect they will be around for a while.”