Goldleaf rides wave of electronic checks

For Williamson County schools, the move four years ago to offer direct deposit of employees' payroll checks has saved $10,000 a year from not ordering checks. Savings also have come from reduced time for sorting checks, officials said.

Direct deposits — which utilize the national automated clearinghouse networks — have exploded in the past decade, as employers like Williamson County schools have realized cash savings.

Also benefiting from this growth are companies providing the software to make it happen, and Goldleaf Technologies of Brentwood is one company that is looking to ride the wave.

It provides the software that connects Williamson County schools system to its bank and also ensures that the process meets electronic payment guidelines.

The automated clearinghouse, or ACH, software was one of two products acquired last year by the company, formerly Banc Internet Group, from a unit spun out by Atlanta credit information services provider Equifax. Banc Internet then took on the Goldleaf Technologies name, which was the original company that sold Equifax the software in 1997.

Now, Goldleaf is developing an Internet browser-based version of the software, which executives said will provide another means for banks to sell ACH services to business customers. Executives also hope to benefit from relaxation of electronic payment rules by the National Automated Clearing House Association.

''It will make the process easier,'' said Paul McCulloch, Goldleaf's chief executive of the Internet application. ''It will no longer require installation of software.''

While large businesses have embraced the savings offered through electronic payment options, small businesses — targeted by the type of banks served by Goldleaf — have been slow. Banks pay an initial licensing fee and an annual maintenance fee to Goldleaf. Banks then make money by charging business customers a transaction fee for each ACH payment.

A survey of 1,000 businesses being released this week by EPS Consulting of Salisbury, Md., found two-thirds of small businesses don't believe receiving electronic payments directly from customers will save them money. While 95% of the survey respondents accept check payments, only 8% accept ACH direct debits.

The low adoption rate was attributed chiefly to small businesses lacking volume or technical capacity. Richard Herrington, president of the parent company of Franklin National Bank, which provides the service for Williamson County schools, also sees overstated security concerns as another factor.

''We do believe that over time, it's going to continue to grow,'' said Leon Majors, president of EPS Consulting, about small businesses' use of electronic payment alternatives. ''Someone has to prove the business case and it has to get attention.''

David Peterson, Goldleaf's executive vice president, said that by being licensed to use Goldleaf's software, banks can ensure they are prepared meet the needs of clients.

''The fact things happen at larger businesses and larger banks first is not a great surprise,'' Peterson said of the EPS survey results. ''Many small businesses don't know to ask their banks if such services are available. A lot of it is education on both the financial institution's part and on the business institutions' part.''

As a reflection of the growth of the industry, the volume of payments via the automated clearinghouse networks rose more than 350% during the '90s, from 1.5 billion in 1990 to nearly 7 billion in 2000, according to the rule-making body, the National Automated Clearing House Association.

Out of the 30 billion or $7.3 trillion of payments made electronically each year, 19% of the volume and 78% of the dollar value is made through the ACH network, according to a recent retail payment systems study by the Federal Reserve System.

While the ACH networks have been around since the '70s, ongoing changes in rules guiding transactions have made it more appealing to businesses, experts said.

Starting in mid-March, for instance, companies that have large amount of paper checks sent to centralized lockboxes will be allowed to convert those checks into an ACH debit on-site instead of manually sending the checks back to a client's bank.

A change last year allowed retail and other businesses to simply take the account and routing number off customers' checks and create an electronic check on-site.

Both changes are expected to speed up collection and reduce processing costs.

The new ACH products acquired last year have given Goldleaf another dimension as it pursues growth, CEO McCulloch said. The ACH products accounts for half of Goldleaf's revenues, which officials project will be about $7 million this year.

Since buying the products, Goldleaf has increased the number of banks licensed to use its software by 50, McCulloch said. It now has 1,500 bank clients and 10,000 businesses using the ACH products. In addition to U.S. clients, it is the main ACH vendor for central banks in Panama and Aruba, among others.

The company also has been growing its original business of designing and maintaining Internet sites for banks and selling other financial products through the sites.

That business has 200 banks and 1,000 small business clients, McCulloch said.

The original Banc Internet Group traced its roots to startup in 1999 by a group including Goldleaf Chairman Carl Brasser and McCulloch. Brasser experiences include roles as a co-founder of a company, now part of FISI-Madison Financial, and then in the startup of Brentwood-based banking software firm Private Business Inc.

''Everything we do is focused on creating a recurring revenue stream,'' said McCulloch, comparing Goldleaf's business model to those two companies.

Article reprinted from The Tennessean

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