BUSINESS

As Personal Cheques Die, Business Reinvents Itself

07/05/2015 10:00 EDT | Updated 07/06/2016 05:59 EDT
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Woman writing a check
TORONTO - Ten years ago, Toronto-based DH Corp. made virtually all of its money by printing cheques.

But over the past decade, the company once known as Davis + Henderson Corp. (TSX:DH) has transformed itself into a technology business serving financial institutions, with cheques now comprising only 20 per cent of its revenue.

"It's long been predicted that cheque usage will decline," Duncan Hannay, president of the company's Canadian division, said in an interview.

"I think that was the thing that really prompted the company to look at its future and assess how it could better position itself with its banking clients — both in Canada and potentially globally, to diversify its revenue."

With the emergence of new digital forms of payment such as email money transfers, use of paper cheques has been steadily on the decline, shrinking by roughly five per cent a year, according to the Canadian Bankers Association.

While personal cheques have been losing their popularity by high single digit percentages annually, business cheques have fared somewhat better, with usage slipping by low single digits.

"Canadian business still depends on cheques to a great extent," Hannay said. "It's highly integrated into their workflows, so the decline of cheques in business is not nearly what it is on the consumer side."

The declining popularity of cheques has caused DH to shift gears, expanding into new lines of business such as digital payments and providing technologies that banks use to make loans. In fact, the company's lending segment now makes up more than 40 per cent of its revenue.

In March, DH acquired New-York based global payment services firm Fundtech for $1.25 billion, a deal that will help broaden its customer base in the United States.

Meanwhile, Hannay says predictions about the death of the cheque have been somewhat overblown.

"The cheque has not declined at nearly the pace that was predicted."

In fact, Hannay says there is some opportunity for DH to grow its cheque business. Although the dominant player in Canada's personal cheques market, DH's overall market share is roughly half.

"Given that we only have a 50 per cent share of the business cheque, and that's our most profitable cheque segment, there is an opportunity for us to grow a little bit into that space," he said.

The introduction of remote deposit capture technology, which allows customers to deposit a cheque simply by taking a picture of it with their smartphone, has likely extended the cheque's lifespan for a number of years, Hannay added.

He predicts that paper cheques will be around for the next decade or so.

"But beyond that, inevitably, electronic forms of payment will dominate."

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