Naturally, we use online payments as much as possible both at home and in our business. But even so, we still go through a box or two of old-school paper checks every year.

Running low on business checks, I today logged in to my bank to order a box. Unfortunately, it does not support online reordering of business checks, only personal ones. I was referred to a toll-free number. But rather than go through an unknown phone ordering process, I went back to WalmartChecks.com (note 1), a service from Wal-Mart that I had tested many years ago.

The reordering process was drop-dead simple: Just click Quick Reorder on the homepage, type the bank's routing number, account number, and beginning check number, then make a few selections from the menus, and press reorder. It takes all of about 60 to 90 seconds. You don't even have to input payment info, because the total is simply deducted from your checking account.

But the reason for this post is to highlight the interesting cross-sale made during the reordering process. For $1.95 per box, Wal-Mart offers a check-fraud protection service called EZ Shield from a company of the same name, a recent spin-off from printed-check marketer, Custom Direct (CDI). I was pitched the product through a yellow-highlighted box in the middle of the order-confirmation screen (see first screenshot below).

I wasn't sure what it was, so I clicked on More Details to learn that EZ Shield reimburses users for fraudulent use of the checks in the box (see second screenshot). The service provides coverage of up to $25,000 total if one or more of the 200 checks is altered, stolen from the payee and deposited, or used with a forged signature. The EZ Shield logo is printed on the checks to remind users that they are protected.

Bottom line: While paper-check fraud is not a major concern to me, I still value the small improvement in peace of mind I get for just $1.95. And for Wal-Mart, the $1.95 was a 28% revenue lift to a $6.96 box of checks. More importantly, the value-add makes it more likely I'll be a repeat customer even when my bank eventually enables online check reordering.

WalmartChecks.com shopping card with EZ Shield cross sales (9 Sep 2010)

Popup explanation of EZ Shield (link)

Note:
1. According to Compete, the check-ordering site gets about 150,000 unique visitors per month and traffic has been relatively flat the past year.

We note with some bemusement that Wal-Mart Stores Inc.’s application for a Utah industrial loan corporation charter is attracting predictable suspects, both for and against.

WalMart’s plans have, of course, spread panic in the ranks of bankers large and small, which panic has reached sufficient pitch to prompt the FDIC to schedule hearings on the matter. Indeed, 40 members of Congress have signed a letter in opposition to WalMart’s application.

Continue reading "Wal-Mart Bank and Financial Protests Getting Serious" »

The same week that Pay By Touch settled outstanding government claims against CardSystems, news of a new computer breach that could be at least as damaging emerged from California, while keylogging made the front page of the New York Times.

Continue reading "News from the Online Fraud Cyberwar" »

Two weeks ago, Motorola Inc. introduced the same mobile payments platform already being used in Japan and India, opening the door for U.S. banks on a retail payments future that could spell prosperity or doom, depending on the choices they make.

Those loaded alternatives have little to do with the immediate future for mobile payments in this country. Buying cheeseburgers by waving a cell phone will begin as a gee-whiz novelty in this country, packaged in ways that will preserve the bank brand, and allay the current boardroom anxiety that banks are fated to become mere payments utilities.

The real danger to banks is the next generation of m-payments, when the payments chip is miniaturized to fit into a ring or necklace; at that point, opportunities to remind customers of which bank’s card they’re using will disappear, along with the visible screen, taking with them much of the bank’s relationship with its customers. But this generation is here now, says Dan Schatt, a Celent Communications analyst, and likely to shake things up.

Continue reading "Motorola Introduces Real Mobile Payments to US Market" »

This week eBay reported that PayPal’s volumes were above $8 billion for the first time, and the Federal Deposit Insurance Corp. (FDIC) agreed to hold hearings this spring on whether to issue FDIC insurance to Wal-Mart Stores Inc. as part of the retail giant’s application to get a Utah industrial loan corporation.

Both companies are being watched almost microscopically by banks and other payment providers who are afraid that these companies are going to somehow walk away with their payments franchise. Our advice: Relax.

Sure, PayPal is doing well: Net revenues this past quarter grew 48 percent over the same period last year—they were $298 million—and gross volume was up 45 percent by the same measurements. But unnoticed amongst all the heavy breathing was that PayPal user accounts grew 51 percent in the same period. In other words, the growth in volumes and revenues was proportional to the growth of eBay’s core business, not some indication of a sinister plot for world domination.

The hysteria surrounding Wal-Mart’s moves is even worse. The suspicion in the payments industry, of course, is that once Wal-Mart has the license and the insurance, it’ll begin pushing into community banking, driving all those small institutions into the famous Wal-Mart meat grinder and emerging a coast-to-coast financial services colossus. And considering Wal-Mart’s history, it’s easy to succumb to those anxieties.

But we believe Wal-Mart when it says it only wants the license so it can be its own payment card acquirer. For one thing, the move makes sense for it: According to our calculations, it’ll save Wal-Mart at least $650 million a year, based on its 2004 revenues of $172 billion (see Electronic Payments Week, July 26, 2005). And for another, Wal-Mart’s application to the FDIC says on page one that this is their reason for wanting the bank, and we are skeptical that Wal-Mart executives would willingly commit perjury in such a closely-watched event; there’s absolutely no evidence that these guys are stupid.

There may be some logic to our view, but our belief, touching though it may be, hasn’t prevented over 1,500 comment letters to have been sent to the FDIC on the matter, nor has it discouraged the House Committee on Financial Services from scheduling hearings about Wal-Mart’s plans. And the FDIC has already agreed to delay any decision on the insurance application until the issue has been fully aired.

Those hearings will make interesting viewing on C-SPAN, but in our view, banks and payments processors would be better served in the case of both companies by studying what they’re doing, and drawing useful lessons from them. We can understand why the success of PayPal, and the motions of Wal-Mart, would arouse anxieties within the industry: It’s being swept by transformative change, and both companies represent what Harvard professor Clay Christensen calls disruptive technologies.

But aside from finding any irony in the spectacle of capitalists trying to stifle competition, there’s the deeper concern that the industry may be losing faith in itself. Banks began as counting houses, and unless they do something unreasonably boneheaded, they are unlikely to be driven out of their inner redoubt as long as they meet that competition head on.

Our recommendation: Remember what U.S. Grant said at the Battle of the Wilderness. Robert E. Lee had whipped the Union twice before on the same ground, and Grant’s staff was beside itself wondering how Lee would whip them again. “Stop worrying about what he’s going to do to you, and start thinking about what you’re going to do to him,” said Grant. That campaign ended with Lee's surrender at Appomattox.