The check's in the email

by Nate Hoekstra

Checks have been used to pay for goods and services for more than 200 years. Now, the way they are used to send and receive payments is getting an overhaul, and Grand Valley is jumping on board to save money, help protect the environment, and make sure people who need to get paid have easy access to their money.

The company that’s poised to turn the checking world on its head is called VerifyValid, a small outfit run from a non-descript office building just off of U.S. 131 on the south side of Grand Rapids. From their space, co-founders Paul Doyle, Dean Tribble and Todd Tracey, ’91, are working to make payments more secure and easier to access than ever before. The premise is simple: give business owners (large and small) a simple, affordable way to get rid of their physical checkbook, make it easier and more secure for them to pay their vendors and suppliers, and make it easier for the recipients to get their cash.

At first glance, the system sounds similar to other forms of electronic payment, like Automated Clearing House (ACH) or Electronic Funds Transfer (EFT) systems, but the VerifyValid system is different. All payments are treated like any other check, just without using the post office as an intermediary.

From left are Dean Tribble, Todd Tracey and Paul Doyle of VerifyValid. The company works to make getting paid easier, and is saving Grand Valley thousands of dollars in the process.
 

The reason the VerifyValid system is revolutionary is because it gives users a chance to cut the weakest link — the physical check — out of the check-writing and cashing process. Doyle, the company’s president and CEO, said the paper check is just a vehicle, and what everyone is really after is the data that makes up the check. The problem with checks is that the information starts off in digital format, goes to analog when it’s printed, and then has to go back to digital format for the check to be processed at the bank. Doyle knows that’s not the best process.

“Using that method is like going out and buying a Ferrari, and driving it to the edge of the dealer’s lot, but then shutting off the engine, hooking a mule to the front of it, and using it to pull the car to your house, then turning it back on and driving it from your driveway into your garage,” Doyle said. “It just doesn’t make any sense. It’s the same way with checks.”

And there are a lot of people hooking Ferraris to mules — according to the Federal Reserve’s latest non-cash payments report, there were 7.9 billion business-to-business checks issued in 2009. Instead of taking digital data and slowing it down by putting ink on paper, paying for postage, and waiting on delivery, Tracey said VerifyValid can keep the data digital, and take the ‘mule’ out of the payment processing chain.

“It’s a no brainer,” said Tracey. “The check is just like any other, except you don’t have to wait for it to get there. It’s delivered instantly, and you can print it and deposit it right away.”

Doyle said the process to send a check using the system is easy. Log on to the secure company website, pick which authorized account you want to pay from, fill out how much the check is for, to whom you’re sending it, and type in their email address or phone number. With a click of a mouse, the check is delivered, instantly and electronically.

“It’s not an ACH or EFT withdrawal, and there’s no need for the person you’re paying to share their bank account and routing number information,” Tracey said. “The email has a link to a PDF file that you can print and deposit like any other check. If someone decides to print and deposit the check, they still have benefits, including immediate payment, fraud prevention, no interchange fees, and no envelopes to mail or open. Businesses also don’t have to make any changes to the payable and receivable processes. That’s all without the payee needing an account through the company.”

Doyle said a VerifyValid account is free and has added features.

“All checks you get go to a secure virtual lockbox on the website, where you can review all incoming payments,” Doyle said. “Since the check data is still digital, payees can download the remittance information to import into accounting software, and get all payments in one place, saving the time of paying an employee to process all of a business’ checks manually.”

The fastest option is to have a VerifyValid account that’s tied to an account at a participating financial institution. At present, there are only a few local banks that have teamed up with the company, including Choice One Bank, but the number is growing. Lou Knooihuizen, ’71, chief lending officer for Choice One, has been working with Doyle, Tracey and Tribble to build the system into customer accounts. If you have an account with Choice One, once you get a check sent to you electronically, a single click forwards the check to the bank for them to deposit the funds directly into your account.

That means instead of printing a physical check, sending it to someone through the mail, them having to take it to the bank for deposit, waiting for the check to clear, and the money finally being deposited, the VerifyValid system can go from check issue to deposit in a matter of minutes — not days.

The benefit to Grand Valley vendors, suppliers, contractors and, eventually, students who are getting refunds from student loans is one of many reasons the university is now using the system to send checks, said Brian Van Doeselaar, associate university controller.

“From the standpoint of the people we are paying, it’s a valuable service because it gets them their payment quickly and securely,” Van Doeselaar said. “From the university standpoint, there are many benefits. It saves us the cost of postage, the cost of checks, the cost of specialty ink, transaction costs, the labor costs to sort and mail all of the checks, the time for someone to process all of the check information, and cuts down on the university carbon footprint at the same time.”

The impact of issuing checks at the university is significant. Van Doeselaar estimates Grand Valley writes about 35,000 checks per year to its vendors and suppliers, each at a cost of more than $1 apiece. By emailing those checks instead of sending them in physical form, it saves thousands of dollars a year. The new process also saves on labor, equipment, ink, check stock and envelopes, and postage.

Doyle estimated that between fees and time of taking checks to the bank for deposit, the people being paid save $1 on the receiving end as well. That’s $70,000 saved annually, without any other factors. Given that Grand Valley has about 8,000 vendors, and about 5,000 of them are local, Doyle begins extrapolating. If each of those 5,000 local vendors has a VerifyValid account, and most small businesses write about 20 checks per week, or about 1,000 checks per year, that’s a local economic impact of $5 million every year. If their vendors and suppliers switched to the VerifyValid system, the cost savings continue to grow outward. Doyle estimated the economic impact of a statewide network of businesses to easily pass $10 million annually.

Security is a cornerstone of the system as well — in fact, the system was born several years ago when Doyle, an expert in Internet data security and authenticity, was told about a local company that had been targeted by fraudulent check writers. He found the solution: use the data to make sure that the check that was being presented for deposit was actually written from a verified account, by a person authorized to write it. The system combines the data and the time it was written in an algorithm to create a cryptographic signature that can never be reproduced, because no single point in time will ever happen more than once. The system then stores the data and can verify that the check is valid, not a fraudulent duplication or representment of the same check.

Saving transaction costs isn’t the only thing on the minds of the VerifyValid team. They’ve embraced the side effect of electronic check distribution: reduced paper use and waste, along with the other materials needed to mail a check. “Think about the amount of material it takes to send a paper check,” Tracey said. “By sending checks over the Internet, it’s more secure, cheaper and better for the environment. It’s a win-win for everyone.”

Tracey estimated for every two checks that are delivered electronically, the carbon reduction is equal to the same amount produced on a trip from Allendale to Grand Rapids.

“It’s our hope that people see the same value in this service that we do, and that Grand Valley does,” Doyle said. “It’s new, and it’s exciting to think of where this is going, and we’re glad to be helping people find a better way to do their business.”



Grand Valley connection

VerifyValid’s has many ties to Grand Valley. The university is the growing company’s largest client; one of the co-founders, Todd Tracey, is an alumnus and in the Laker Athletics Hall of Fame; and the company got help along the way from several Grand Valley departments.

Brian Van Doeselaar, associate controller, worked with the company in the pilot phase to determine how the system would work in the real world, and H. James Williams, dean of the Seidman College of Business, encouraged faculty members like Paul Mudde and Jaideep Motwani to work with the company.

VerifyValid also gives Grand Valley students internship experience, and has several alumni and faculty members on the advisory board. Its principals received advice from the Center for Entrepreneurship and Innovation.

Paul Doyle, co-founder of VerifyValid also said Jim Bachmeier, Grand Valley’s vice president for Finance and Administration, was a driving force behind the development of the final concept.

“Jim represented the ultimate customer at the university,” Doyle said. “He advocated for accomplishing the university mission without compromising on quality, and making the university as efficient as possible. Jim has been an inspiration and huge supporter of our relationship with Grand Valley. He’s the one who really put the role of the university as an economic developer in crystal clear focus.”
 

Page last modified February 19, 2013