Remember Chuck? The brand was born in 2021 as a payments play when digital payments provider Payrailz teamed up with Alloy Labs Alliance to build a peer-to-peer payments tool for community banks that they hoped would rival the big banks’ Zelle service.

But that was all before Payrailz was absorbed by Jack Henry & Associates in an acquisition completed in 2022. As a result, Chuck was also swallowed by Jack Henry, leaving little trace of the ambitious effort that was expected to help community banks better compete with their larger peers when it came to P2P consumer offerings.

Still, the spirit of Chuck has survived under the leadership of Peter Davey, who joined Alloy Labs last year as a venture partner focused on reshaping the initiative. Davey is well-equipped to breathe new life into the effort, given his nearly seven years at The Clearing House, steering product innovation for big banks before teaming with Alloy. Prior to that, he led payments strategy and innovation at Capital One.

Since joining Alloy last September, Davey has been trying to better understand what the group of community banks most need in terms of their next-generation payments technology. For now, 15 community banks are collaborating on the new project, and investing in it. 

“We’re working with all the banks to understand what their needs are,” said Davey, who declined to say how much capital has been invested.

What the partners involved have concluded so far is that P2P services have become so widespread as to be a less valuable target for development. “The consumer side is an oversaturated market,” Davey said in an interview this week. “It’s really hard to compete in that if you don’t have the scale because it drives payments to be more expensive.”

Instead, creating a payments tool for use by the banks’ small and mid-sized business clients has more appeal. That area has received less attention, and in light of such businesses being a sweet spot for smaller financial institutions, it has become increasingly clear that’s where Alloy and its community bank partners want to focus, Davey said.  

SMBs were a later-stage goal for Chuck too, but now the partners are leap-frogging the consumer market to focus on it first. And they’re ditching the Chuck name. 

While the Chuck moniker can still be seen through a link on the Alloy Labs website, it’s not evident on the Jack Henry website, even though that purchaser suggested the services live on.  

“Jack Henry continues to provide both functionality and support for Chuck,” a spokesman for bank technology provider Jack Henry said last month by email. “When an FI signs on with Alloy Labs for the Chuck solution, that FI also contracts for our Payrailz P2P product.”

Davey describes Chuck’s fate this way: “The Jack Henry acquisition put that into a little bit of a tailspin.”

The follow-on effort is taking place in “stealth” mode in a new company headed by Davey that he declined to name. Still, he plans to unveil the brand sometime in the next few months. “We’re working through that model right now,” he said.

Some of the community bank partners were backers of Chuck, but others have newly signed on, Davey said. The earlier contingent included Chesapeake Bank, Five Star Bank and Reading Cooperative Bank, among others. There were no residual monies from the Chuck foray, Davey said. Several of the banks involved in Chuck didn’t immediately respond to a request for comment.

While they all have pivoted from Chuck, the partners learned from the experience, and are driving that new knowledge into the latest effort, said Davey. 

And a fundamental objective of the Chuck initiative remains, according to Alloy Labs CEO Jason Henrichs. He told The Financial Brand last year that the work is still about “turning the payments business from a cost center into a revenue center.” His firm works with community banks through a consortium that helps members increase their strength in the marketplace through joint innovation. 

The new SMB payments service will be piloted later this year by a few of the community banks that are involved, with an expectation that it’s operating by the end of the year, with more fine-tuning to come next year, Davey said.

“We’re currently working out the first generation of the platform to drive a pilot in the late summer or early fall timeframe,” Davey explained. 

By the middle of next year, he expects the system to be performing and ready to scale with the onboarding of additional financial institutions, he added. So, it seems a successor will be following in Chuck’s footsteps sometime soon.

By Lynne Marek on June 27, 2024
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