While check use has plummeted over the last three decades, according to the Federal Reserve, check fraud has been on a different trajectory, more than quadrupling nationwide since the pandemic, according to Treasury Department figures.
Codat, a fintech based in London and New York, aims to remedy the issue.
The firm Tuesday launched its Supplier Enablement API product, which seeks to help banks drive spending through virtual card products by allowing business customers to more easily share data from their accounting software with their bank.
By ousting static supplier payment files for secure, continuous API connnections, Supplier Enablement offers more robust data sets and analysis to banks.
JPMorgan Chase has come out as one of the early users of the product.
“Thanks to our work with Codat, our clients can easily and digitally deliver critical supplier enablement data to our firm, helping to realize efficiency gains and cost savings sooner as well as across a greater share of their spend,” said Stephen Markwell, head of product strategy and fintech partnerships for commercial banking at JPMorgan, in a prepared statement.
Codat Chief Revenue Officer Joey Rault said in an interview with Banking Dive that when a business customer first engages a bank in search of a product — perhaps a loan or a commercial card — the first thing the bank asks of them is to provide data.
Getting the data to the bank, and in a format the bank can use, can be a timely process, he explained, in particular for small- to medium-size businesses.
“What we're hearing from the banks and what we're hearing from the relationship managers, the sales professionals, the bankers who are engaging with these small- and medium-sized businesses, is that it’s two, three, four weeks for them to actually get the file manually on average. With Codat, we’re talking about five minutes,” he said.
“That time savings makes it easier for the bank to build a deeper connection with the small business because they literally are connected directly to the source data,” Rault said. “And more importantly, from an actual customer relationship standpoint, now we're not going back and forth about the data — we're actually having a conversation about the service.”
Supplanting check use with virtual cards has two main benefits, explained Ed Sherrington, Codat’s head of product for banking.
“In this high inflationary environment, there's a lot of pressure on cash flows, both for the customers who are paying their bills and for the vendors and suppliers themselves. Virtual cards are a win for both sides because they enable bank customers to pay their vendors on credit, and for the suppliers that on average, get paid much, much quicker when it's by virtual card [as opposed to check]. That has huge benefits to their cash flow,” Sherrington told Banking Dive.
The other benefit, he explained, is “an increased sensitivity towards fraud and keenness” to prevent check fraud.
“Check payments are highly susceptible to fraud,” he said. “The more that we can get payments off of check and onto more secure payment methods like virtual card, the better for everyone involved.”
