An Israeli Startup That Wants to Break the Banks

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Check, the Israeli application developer with an app of the same name, is considered the most successful mobile bill payment service in the United States. Last week the company reported completing a $24 million funding round, raising investment in it to $47 million.

"The main purpose of the application is to show users the state of their accounts and keep them in the black," says CEO Guy Goldstein. The company, formerly known as PageOnce, intends to use proceeds from the latest round to expand its 100-member workforce.

In her most recent annual report on Internet trends, venture capital analyst Mary Meeker dedicated a section to the turmoil now engulfing traditional industries, including the financial services industry. She used Check, which has an annual growth rate of 1,700%, as an example of technological services that people are using in place of traditional banking. Others include Square, which offers mobile payment at points of sale, has processed payments totaling $15 billion so far and is growing 300% annually; on-line loan company LendingClub, which has transferred $1.8 billion to date, tripling its transactions in a year; virtual currency Bitcoin; and a mobile application from Chase bank through which more than $29 billion a year is transferred. The Chase app has 20 million customers and a 250% rate of growth.

"Check is now at the center of two big revolutions: the mobile revolution and the means-of-payment revolution," says Goldstein. "All the traditional banking models are experiencing intensive upheaval. The world of mobile payments now generates immense revenues. The purpose of the current round of funding is to position the company as a leader in the bill payment field. The payment possibility with our application connects with ready user information on the state of his bank and credit accounts and the various bills he needs to pay."

Goldstein sketches out an ambitious vision for the company.

“We want to reach a situation in which 10% of all bill payments in the U.S. go through us: about $400 billion a year,” he says. “We are growing now more than any other payments application in the market, and believe we can reach the target in another three or four years. We have a product and technologies much superior to those of the competition, and our partnerships program with billing organizations has met enormous demand.”

An estimated $4 trillion in payments are made by Americans each year to pay electricity, water, local tax, rent and preschool bills, says Goldstein.

“As opposed to Israel, in the U.S. there is almost no automatic debiting for payments such as these,” he says. “Payments to the water and electricity companies, for example, are mostly made through checks sent by mail or on the company’s website. When it comes to local services like preschools or tutors, payment is usually by check or in cash. We are now changing this field.”

Check allows users to choose whether they want payments to come off a debit card, a credit card or directly from their bank account. This can give them greater flexibility than if they had been dealing directly with the service provider. For instance, Check allows customers to pay their water bill by credit card even when the water utilities only accept direct payment from a bank account. To pay their rent, Check users are asked for the landlord’s email address, the payment amount and which bank account or credit card to use. The landlord then receives an email or text message asking him or her to register for the service and provide banking details.

In the past year, 10 million Check users paid $500 million through the app, says Goldstein.

The fact that Check works with a variety of banking and credit services also enables it to help customers compare their fees with those charged to other customers with similar credit ratings. If the data are not in the customer’s favor, Check might recommend switching to a different credit card.

One of the first 100 App Store apps

In 2008 the company, then called PageOnce and focused on aggregating individuals’ financial data in one place, raised $1.5 million in seed funding from Liron Petrushka and Bobby Lent. Eitan Bek, a partner at Pitango Venture Capital, led a $6 million investment round in 2009 and then joined the company's board. In May 2011, PageOnce raised $15 million in a round led by venture capital firm Morgenthaler in which Pitango, currently the largest shareholder, also participated. The latest round was led by Menlo Ventures and also included Morgenthaler and Pitango.

Two years ago the company changed course and entered the mobile bill payment field. In May of this year it changed its name to Check to better suit its new activity.

Check is by far the largest Israeli startup in the field of cellular apps in terms of the amount of money it handles.

"We entered the mobile and smartphone field right at the outset,” says Goldstein. “We were among the first 100 applications at App Store.”

The company is planning to hire about 10 more workers in Israel “very shortly” in the fields of mobile, information technology and support. Check currently employs 50 people at its development center in Kfar Sava, along with 20 marketing and business development staffers at its offices in Palo Alto, California, and 30 workers at its service center in Manila.

Check's business model is based on premium services: The company doesn't collect a fee on payments made directly from the bank, but when payment is made through debit or credit cards that the service provider does not ordinarily accept, Check charges a 4% fee. If payment is urgent, Check provides same-day service for a $15 charge.

The app is similar to that offered by the U.S. company Mint, a pioneer in linking bank and credit accounts to cellular devices, but while Check enables users to pay their bills, Mint is primarily aimed at managing a budget.

Check has recently begun positioning itself as the official mobile payments app for various service providers. So far three companies have agreed to use Check as their official payment app: Alltel Wireless, a wireless service provider in the southern United States that has 600,000 customers, and two California water utilities, one serving Irvine and one serving Palm Springs.

The company operates only in the United States, for now at least.

“The mobile payments market is a global market, but for now we’ll continue focusing on the U.S. – a market where the problem we deal with is quite painful,” says Goldstein. “When we reach a critical mass we’ll also move on to other markets.”

Mary Meeker: People are using technological services in place of traditional banking.Credit: Bloomberg

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