A secure, open-loop, cost-saving, customer-accessible, multiplatform P2P payments network might sound too good to be true, but community bank consortium Alloy Labs Alliance hopes to achieve just that with the CHUCK payment rail.
By Katie Kuehner-Hebert
Alloy Labs Alliance’s
A different kind of peer-to-peer payment service is now available, “built by community banks for community banks.”
In December, members of Alloy Labs Alliance—a consortium of community banks that includes several ICBA members—launched CHUCK, an open network for instant person-to-person (P2P), business-to-business (B2B) and consumer-to-business (C2B) payments that allows recipients to choose the payment rail where they want the money deposited. For example, a customer of a participating bank can send a payment using the bank’s application on their computer or mobile phone and can route the money to either their checking account or to another payment rail like Venmo.
“We don’t need a new version of Zelle. We need to think of payments holistically and create a payments hub that enables community banks to also participate in the digital payments revolution.”
—Jason Henrichs, Alloy Labs Alliance
“We don’t need a new version of Zelle,” says Jason Henrichs, CEO of Alloy Labs Alliance in Saint Paul, Minn. “We need to think of payments holistically and create a payments hub that enables community banks to also participate in the digital payments revolution.”
The CHUCK network, which is available to all U.S.-based banks, fintechs and more, sits on top of a payments rail operated by Payrailz, a digital payments company based in Glastonbury, Conn.
Julieann Thurlow, CEO of $730 million-asset Reading Cooperative Bank in Reading, Mass., was instrumental in leading the effort to create the open network in collaboration with the consortium’s other institutions.
“For a community bank to be innovative means you need to make big bets with your depositors’ capital—and that’s something we take very seriously,” Thurlow says. “By working with other banks, we can share the costs, which allows us to take bigger bets on innovation than each of us could do on our own.”
The whole package
By participating in the CHUCK network, community banks can offer a much more secure P2P service than some other rails by requiring multifactor authentication and other controls, Thurlow says. Moreover, payments are withdrawn from the user’s FDIC-insured checking account and are protected by multiple layers of security, which prevents fraudster access.
“The beauty is that this network has been created by community banks for community banks.”
—Julieann Thurlow, Reading Cooperative Bank
“For the bank, participating in this network also enables all of our customers’ information to be under one roof, rather than being spread around the payment ecosystem,” Thurlow says. “It also helps us better control that data for the customer as well.”
Thurlow encourages other ICBA member banks to consider participating in CHUCK. “The beauty is that this network has been created by community banks for community banks, which means we’ve also intentionally kept the costs down,” she says.
American State Bank in Sioux Center, Iowa, is another CHUCK network participant.
“As a bank, we are always evaluating new products or services to meet or exceed our customers’ expectations,” says Joel Westra, first vice president of the $1.1 billion-asset community bank. “We researched Zelle when it was first rolling out to community banks, and the experience and the pricing didn’t meet our standards. In a rural market, most of our customers and their friends and families don’t bank with the big players or other banks with Zelle, so we expected their closed-loop system to be clunky.”
Participating in the collaborative effort to create the CHUCK network enabled American State Bank to play both “offense and defense,” Westra says. On the offensive side, the consortium built a unique product that will solve money movement for customers in a way that works for them and their networks. It’s also a defensive measure, because the network enables customers to use the bank’s services and technology rather than going to a fintech or a big brand.
“In addition to making local investments in our community, we know that our delivery of banking services needs to be top-shelf and meet our customers’ ever-evolving expectations,” Westra adds.
A bright future for CHUCK
The CHUCK network is just the start for the consortium. Alloy Labs has a “very robust” product development pipeline that includes better payment tools for small business customers, Henrichs says. To aid in these endeavors, the consortium has a Concept Lab, a startup accelerator dedicated to launching new products by forging partnerships between startups and banks.
Westra says he has “personally enjoyed” working with newer fintech companies in the Concept Lab, examining how his community bank might implement their technologies, strengthen their value proposition to potential customers and help them understand how they might work with more community banks.
“As we build out the payments platform, our customers should benefit from continuing innovation that will be customer-centric,” he says. “Our group is still laying the foundation for those innovations, but the customer will be the center of whatever path we take.”
American State Bank also participates in Alloy Labs’ Centers of Excellence, which connects Westra and his team with other bankers and thought leaders in areas like marketing, third-party diligence, cybersecurity and cryptocurrencies.
American State Bank joined Alloy Labs originally to make sure the institution was up to date with what was happening in the bank technology space, but the benefits “have been much more than that,” Westra says.
“Now, instead of going to conferences and listening to sales pitches, we often know who the up-and-comers or strong players are,” he adds. “It takes some of the guesswork out of vendor selection, or, at the very least, we can narrow it down quickly.”
The biggest benefit of belonging to the consortium has been meeting other bankers, “bouncing ideas” off each other and learning from each other, he says.
“We may serve different types of customers, be in different geographies or have extremely different strategies,” says Westra, “but we still share a lot of the same struggles and goals.”
Katie Kuehner-Hebert is a writer in California.