A small check-printing company is making some noise in the shadow of the industry's big boys, Deluxe Corp. and John H. Harland Co.
Georgia-based Acom is pursuing community banks and credit unions to provide its check-printing services, with one twist: Instead of providing an outsourced solution like most companies in this space, it is simply selling the equipment so banks can print their checks in-house.
Industry analysts were cautious of this type of business model, saying that even for small banks, the traditional outsourcing model is usually the best option, because checks do not offer a profit margin. The analysts also had never heard of Acom.
And while Acom vp Mark Firmin says the lack of attention is fine with him, he argues that this can indeed be a profitable area for banks.
He also shuns the biggest challenge that analysts note about this industry-that it's shrinking about 4 percent a year, as more payments are made electronically. Firmin says the declining market is not a detriment to his small company. Rather, the big players like Deluxe and Harland are being forced to increase prices, he says, in the face of slower demand-good news for his firm.
His pitch involves a two-pronged argument of enhancing customer service and increasing margins. The customer-service aspect, he says, is more important to banks and that plays to his strengths, he says. His service allows banks and credit unions to deliver checks to customers within 24 hours. It also allows banks to produce checks in any increments they wish, thereby accommodating customers' demands.
The margins, albeit not as important as the customer service, can increase significantly, he says. A bank usually makes a small profit on the prices they charge for checks, about 5 percent or less, he says. With his product, he claims, a bank can make 30 percent without charging a higher price.
Acom, which entered this business in 1999, has about 265 clients and expects to add about 30 annually, says Firmin. A recent addition was Minnesota-based Duluth Teachers Credit Union, a $58 million-asset institution. Credit union officials did not respond to phone calls requesting an interview, but a press release says when the institution was converted in 2004 to a community-chartered credit union-from an educator-based one-it grew substantially, and now serves 7,800 members.
John Westlund, the credit union's president, said his credit union opens 30 to 50 new checking accounts a month and it makes a practice of providing the first batch of checks free. Therefore, the lower costs of Acom were attractive.
Moreover, in the release from Acom and Duluth Teachers announcing the new relationship, Westlund took the unusual step of criticizing Liberty Enterprises, the former vendor that had provided check services. Westlund says that Liberty's check quality had declined to the point that the checks were "virtually tissue."
Liberty was acquired by Harland in June. Harland officials did not return a phone call seeking comment. However, it released its quarterly earnings on the same day that Acom and Duluth Teachers made their announcement. The report showed that its Printed Products segment, which is integrating Liberty, increased profits 157 percent to $27.5 million in the second quarter, compared to a year ago. Revenue increased 26 percent to $148.8 million during the same period.
