Turns Out, Businesses Don’t Have To Ditch The Check

Accelerator initiative Plug and Play FinTech has chosen its third round of startups — 23 companies out of nearly 1,000 applicants, to be exact. And, of those nearly two dozen businesses, a hefty portion are B2B players, signaling, yet again, that innovation in the B2B FinTech and payments space is a black sheep no more.

One of the chosen startups is SnapCheck, started by a veteran disruptor. Ken Kruszka was the first individual to send $1 across borders via a mobile device.

But his decades of FinTech experience largely sprouted in the world of P2P and consumer payments. Now, in launching SnapCheck, Kruszka said he’s looking to tackle more immediate problems of digital payments than some of those that can be found in the consumer world. The company is going after the paper check but wants to let businesses keep their preferred payment method — just use it a bit more sophisticatedly.

New Approach To An Old Problem

The paper check — perhaps the most discussed payment technology in the world of corporate payments. Research shows checks remain the most abundant form of payment in B2B transactions and yet one of the most expensive and insecure.

“The main problem we’re looking at is bridging the digital divide in payments, especially for businesses,” Kruszka said in a recent chat with PYMNTS.

The check is at the crux of that divide. The SnapCheck founder and CEO described the continuing popularity of the paper check as “ludicrous,” but, he added, they have their advantages.

“The one really good thing, and major advantage, that checks have is they’re universal,” he said.

SnapCheck’s solution to paper check’s challenge? Remove the paper but keep the check that everyone already uses anyway by turning it digital. In doing so, Kruszka said he removes the chicken-or-the-egg problem: Even if you get buyers to use digital payment methods, suppliers and banks resist.

Overcomplicating Matters

If approaching the legacy problems of manual B2B payments by digitizing checks seems simple, it’s because, in a sense, it is.

Kruszka, who is participating in the Federal Reserve’s efforts to improve the U.S. payments system, said that some problem-solvers go about fixing B2B payments the wrong way.

“Every payment technology has its place, and there are some really good uses for cards and for ACH,” he said. “However, there are also some really great advantages to checks.”

“We’re overcompensating the solution for the problem,” he said of some of the discussion on how to help the U.S. achieve an ecosystem that supports faster payments.

For instance, he pointed to the ongoing efforts by some to create a universal ACH directory — a feat, Kruszka said frankly, that will never actually happen. Business contact information and data change too often and too quickly, he argued.

Instead of massive undertakings to revolutionize payments, innovators should approach solutions differently.

“We fall back on the pragmatic side of things: Let’s just solve problems today, instead of hoping that everyone is going to shift into a new technology,” Kruszka said. “Let’s meet the pain point where it is.”

His pivot from consumer to corporate payments was part of the realization of where the most immediate pain points are in payments, too.

“I spent the last 10 years in peer-to-peer and consumer and then, a year and a half ago, discovered this big, gaping hole in business payments and realized that this is a much bigger, more acute problem right now,” he explained.

Businesses, he continued, are much more willing to change their payment behavior than consumers are. Consumers are skeptical about new payments technologies, but companies, Kruszka explained, are focused on the bottom line. If a payment technology will save them money, they’ll take it.

The Digital Check

According to SnapCheck, paper checks cost companies $50 billion a year, plus an extra $20 billion in fraud. But the market can’t ignore the proliferation of the paper check.

Lately, there has been an increase in payment platforms that allow companies to pay their invoices digitally. But they often only works if both sides have signed on to that particular service, meaning buyers might have to maintain multiple accounts across multiple platforms at once to pay their various partners.

Kruszka said these players are attacking B2B payments friction in the wrong way, too. “As a payer, I want a little more negotiating power in that conversation than just, ‘Hey, you send me a list of options, and I’ll conform to it,’” he said.

“We offer a way for the payer to get all the advantages of an electronic action — safety, security, speed, convenience and cost savings — without impacting the business operations of the receivables department for the counterparty,” the CEO said.

(Coincidentally, another startup, Checkbook, has only just commenced operations with a similar initiative of digitizing the paper checks, allowing B2B payments to go electronic without completely overhauling the landscape.)

SnapCheck is currently running in private beta phase, but the CEO said his team is working on plugins to develop the product ahead of a full launch. Those new features include integrations with existing accounting and ERP systems.

And while Kruszka stayed mum on exactly what other features will be rolling out in the coming months, he did note that payments security is at the heart of this development.

“Core to our offering is security, all the way from the ground up,” he said. “We have security and safety and fraud control as a key pillar to our solutions.”

Again, it’s another way Kruszka said SnapCheck wants to address one of the problems of the paper check — lagging security — without replacing the check altogether. Doing so will save everybody time and money, and that’s positive for the payments community overall — consumers and companies alike.

“You’re looking at this as a real social good,” Kruszka said. “All of this is trying to help stabilize and improve payments for everyone in the ecosystem, and there is a huge trickle-down effect.”