With Checkbook, a Payments Veteran Creates a Souped-Up Engine for Check 21 Clearing

The United States remains one of the world’s last bastions of the paper check, a situation a startup called Checkbook Inc. sees as a massive opportunity.

The Sunnyvale, Calif.-based company has been working for the last two years on a system that it says allows businesses and individuals to use email to send and receive digitized checks backed by verified funds, via a simple, easy-to-use, browser-based interface. “If you put all that together in a Check 21 interface and offer overnight settlement, it becomes a powerful proposition,” says PJ Gupta, Checkbook’s founder and a former top IT executive at Visa Inc.

Introduced 12 years ago, Check 21 allows banks to swap check images for clearing and settlement. Because imaging eliminates the need to transport paper, funds can be credited to recipients’ accounts the same day in many cases. With Checkbook’s technology, checks are created as digital substitutes from the start, and then sent to recipients via email or text message.

What Checkbook adds, Gupta tells Digital Transactions News, is a slick interface, along with bank connections via application programming interfaces that allow the company to verify the sender’s funds. “We give a token to say whether the balance is greater or less than the amount of the transaction, like a credit card authorization,” Gupta says.

Once the recipient clicks on a deposit button in the email, the API ushers the money into his account. Gupta says Checkbook has built connections with about 15 financial institutions so far but is planning to add more via integrations with bank processors and other integrators.

For now, Checkbook is concentrating on business-to-business and business-to-consumer cases like insurance companies distributing checks to policyholders and distributions of awards to multiple parties in class-action cases. These checks are almost always paper items. Checkbook can speed up delivery and eliminate the need for recipients to make physical deposits at bank branches or ATMs, Gupta says.

The problem with paper checks is one Gupta has worked on for years. In 2006, he left Visa to start Noca, a company that concentrated on creating an easy-to-use online payment system that relied on the automated clearing house Noca eventually migrated to credit card processing for merchants, Gupta says, a business that became hypercompetitive with the entry of startups like Square Inc. and Stripe Inc.

Now, Gupta is focused on the problem of checks again, this time from the Check 21 angle (though Checkbook’s system can also use ACH e-checks). “Checks take too long in the mail, and can get lost in the mail,” Gupta says. “A few days is unacceptable. Everything is real time now.” On top of that, because senders’ funds can’t be immediately verified, depositors are usually limited to an initial $200, he adds.

Gupta also saw opportunity in the paucity of players looking at solutions. When he started Checkbook, he says, “I thought, let’s solve a 100-year-old problem no one is attacking, Nobody was solving that check problem because everyone thought it was so antiquated.”

Now, Checkbook is getting ready for growth. The company has gone live with providers of accounts-payable apps that Gupta says he can’t name because they haven’t yet been announced. “Our system will send out thousands of checks, potentially millions, because it’s scalable and in the cloud,” he says.