Digitizing Disruptive Disbursements: Why We Invested in Interchecks

Our Introduction to Interchecks

The story of our involvement with Interchecks starts with its founder (as most of these stories do), Dylan Massey. We were introduced to Dylan in 2019 by Dave Galvan (thanks, Dave!), a friend of the firm on the digital partnerships team at Mastercard.

Like many of the founders we try to work with, Dylan impressed us from early on with his scrappy and dogged pursuit of his mission — in his case it was to enable more seamless, real-time disbursements for rapidly growing segments of the economy, starting with online gaming.

Dylan’s professional journey started when he graduated from the University of Chicago in 2014 and joined Goldman Sachs in a risk-focused role that opened his eyes to the world of traditional financial services from the inside. While at Goldman, Dylan’s risk role evolved to cover the Goldman digital business (now known as Marcus), which was his first exposure to fintech.

Inspired to pursue FinTech in a more entrepreneurial way (and with support and early investment from his manager at Goldman), Dylan left Goldman in 2017 to begin his startup journey. After teaching himself to code and investigating a number of potential areas of FinTech innovation, Dylan and his co-founders eventually decided to build Interchecks to enable real-time payments a reality for gaming disbursements. They recognized that the pivotal 2018 supreme court ruling, which struck down the Professional and Amateur Sports Protection Act (PASPA), enabled broader regulation and legalization of online gaming. They predicted that this would lead to an explosive growth opportunity for gaming operators, as well as platforms and enablers like Interchecks.

As often happens, we didn’t invest in Interchecks right away. Instead, we introduced Dylan to the smartest people we knew in the gaming and payments spaces, especially our friends and partners at MVB Bank, who ended up becoming large supporters of the business. By investing first in our relationship with Dylan and focusing on being helpful, we were able to see Interchecks develop as a business and Dylan mature as an operator. This is why we were so excited to invest in the company when the opportunity next presented itself, and we are thrilled to be partnering with Dylan and the entire Interchecks team!

Our Market POV

The disbursements/payouts market includes many use-cases, including for eCommerce marketplaces (e.g. Amazon sellers), the sharing economy (e.g. Uber drivers), the direct selling industry (e.g. Amway), to online gaming (e.g. FanDuel winnings). Many existing payout solutions are narrow, verticalized, and inflexible, so we believe there is an exciting opportunity to provide a more flexible, comprehensive platform for disbursements that includes important compliance capabilities to be able to serve regulated industries like gaming. Below are some reasons we’re excited about this opportunity:

1. Next-gen payouts are relevant to many, fast-growing customer segments, especially the highly regulated gaming segment. As regulation opens this market for consumers in most of the U.S., few disbursement players will be broadly capable of serving the opportunity with incumbent and next-gen operators in a way that complies right away with state-by-state regulation. Assuming operators won’t likely want a piecemeal solution, broadly compliant vendors like Interchecks will be very well positioned to earn an early lead in this segment.
2. Gaming is not only challenging to serve, but it’s growing really fast. As gaming grows explosively, so do the transaction counts. It’s an industry where payouts are growing in size and frequency and thus there is a growing need for instant digital payouts, as well as support for multiple methods (ACH, checks, real-time payments, etc). In November 2021 alone, revenue from commercial gaming hit $4.85B, which represented 61.1% annual growth over 2020. (Source: American Gaming Association.)
3. Digital payouts are also increasing more broadly across the board after the onset of COVID-19. For example, ACH-facilitated direct deposits were up 8.2% in 2020 alone.
4. New payment options are required for mainstream payouts. American consumers’ growing desire for seamless and digital-first payments underscores the need for tools that support a broad array of payments, particularly as crypto grows in popularity and many become aware of other efficient methods like real-time payments.
5. Few competitors support a broad set of payout channels and speeds. Across various segments, payees are often limited to high friction experiences that only solve for a single payout method, and few payout solutions have enabled recipients to flexibly choose their payout method and speed.