With paper check volume continuing to decline, the two biggest check printing companies have reported lower third-quarter income and discussed new products meant to help fight the drop.
“It’s becoming harder to offset the pressure in financial services with cost management alone,” said Lawrence J. Mosner, the chairman and chief executive of Deluxe Corp. of St. Paul, in a conference call with analysts Thursday.
Deluxe posted net income of $57.5 million, 1% less than a year earlier. Revenue was up 54%, at $485 million, when $176.8 million from New England Business Service Inc. is included — but down 2% otherwise. (Deluxe bought the business check vendor June 25.)
On Wednesday, Deluxe’s chief rival, John H. Harland Co., reported net income of $12.1 million, down 18%. Sales rose 2%, to $196 million.
“Despite a weak market we have done very well,” said chairman and chief executive Timothy C. Tuff in a conference call Thursday with analysts. “We will continue to introduce new products and services.”
Both companies said that check prices have declined. Mr. Mosner noted that when banks with check contracts at different prices merge, the buyer generally cancels the more expensive contract.
Harland said it sold more packages of printed checks than a year earlier. Chief financial officer Charles B. Carden said the reason was that there were fewer checks in the average package.
Harland’s revenue from the sale of printed checks slipped less than 1%, to $117.9 million.
As for new strategies, Deluxe introduced a prepaid gift card Thursday that can be used like a debit card.
Harland has focused on adding security features to its checks to increase market share. Mr. Tuff said it had just started pilot-testing a “self-authenticating check.”
A bar code stores signature information that enables merchants and banks to verify that the signature is valid, the company says. The feature is designed to work even when a check is converted to an image.
“This new product will aid in preventing check fraud,” Mr. Tuff said. The company expects to make it generally available in next year’s second half.
Alenka Grealish, who manages the banking group at the Boston market research firm Celent Communications LLC, said Deluxe and Harland are “a classic example of companies in sunset businesses that need to figure out where the sun is rising.”
“These guys are pretty much similar animals, in that they are heavily dependent on payment vehicles that are falling out of favor and they haven’t done that much to redefine themselves,” Ms. Grealish said.
Ms. Grealish said Harland’s self-authenticating check is a good idea but will be a tough sell.
Still, “if you can come up with innovative spins that adopt new technology or are components of the new check-imaging world, then great,” she said. “Perhaps it will just keep you in the game.”
