They call themselves “Deluxers.” They are the 8,155 employees of Shoreview-based Deluxe Corporation, which many outsiders still think of as Deluxe Check, though it changed its corporate name about 20 years ago. But in fact, the Deluxers know that printing checks no longer means printing money.
The reason, of course, is the push by banks, utilities, and other businesses away from checks to electronic payments and debit cards. According to a Federal Reserve System study, check writing in the United States peaked in the mid-1990s at 49.5 billion checks a year. In 2003, electronic payment transactions exceeded check payments for the first time: the number of electronic transactions, which include payments made with credit cards and debit cards, stood at 44.5 billion, and the number of checks had fallen to 36.7 billion. From 2000 to 2003, check writing declined at an average annual rate of 4.3 percent, while electronic payments, on average, 13.2 percent per year, driven mainly by a 23.5 gain in debit card use. (The Fed is expected to release an updated study in August.) Deluxe itself estimates that check writing has declined 4 and 5 percent annually for the past few years, and it expects the decline to continue in the near future.
We want Deluxers to feel as if it is okay to be willing to move at a faster pace and to accept change as a good thing in terms of working through the transformation.
More recently, Deluxe has begun to face an additional challenge—a bigger player in the check-printing industry. Even with big national-bank customers like JPMorgan Chase, U.S. Bancorp, Citigroup, and Washington Mutual, Deluxe is no longer the nation’s top check printer. In May, its two largest competitors, Georgia-based John H. Harland Company and Texas-based Clarke American, merged into a new entity, Harland Clarke. (Harland Clarke is owned by a New York holding company, M & F Worldwide.)
But check printing hasn’t been the whole story at Deluxe. All three of the company’s three divisions have seen their revenues decline in recent years. In 2006, Deluxe even experienced something unheard of: a quarterly loss.
By the end of this year, CEO Lee Schram, who’s been on the job since May 2006, hopes to move Deluxe’s Small Business Services division—its largest, accounting for 59 percent of the company’s revenue—into low single-digit revenue gains. This segment provides a variety of printing and consulting services to small businesses. Schram and other Deluxers hope to reduce the bleeding in its other segments—Financial Services (which includes its heritage business, check printing for banks) and Direct Checks segments (which sells checks directly to consumers)—by taking them from the 14 to 15 percent year-over-year declines they suffered in 2006, to showing single-digit declines. If he accomplishes those goals, he says, Deluxe’s year-over-year revenue will hold flat in 2007.
And that, strange as it may sound, would be progress. “If we can keep that model going and add [new products and services] and get some of [our newer offerings] to small business to grow faster, we can get Deluxe to grow the top line,” Schram says.
