Payments — often in the shadow of deposit accounts and loans — can be an area of unexplored growth for banks looking to serve customers better.
A bank charter gives an institution access to the Federal Reserve’s payment rails, which means banks naturally sit at the center of activity. But digital channels and the rise of nonbank players have led to new and faster ways to send money, altering the landscape and competing for community bank retail and commercial customers.
To learn more about the payment opportunities at community banks, Banking & Fintech Editor Kiah Lau Haslett speaks with bankers at two community financial institutions that operate internal payment divisions in a recent webinar. DJ Seeterlin is president of Chesapeake Payment Systems, a division of Chesapeake Financial Shares’ Chesapeake Bank, which has $1.6 billion in assets and is located in Kilmarnock, Virginia. Trent Sorbe leads payments initiatives at First International Bank & Trust, which has $5.5 billion in assets and is based in Watford City, North Dakota. The bank’s Kotapay division, which includes payroll services, settled over $103 billion in ACH originations in 2024. The transcript below has been edited for brevity, clarity and flow.
BD: Tell us about your banks’ payment divisions and how they monetize payments.
Seeterlin: Chesapeake Payment Systems is a division of Chesapeake Bank that was founded 30 years ago and is focused on the merchant acquiring side. We sponsor at the acquiring level — we sponsor entities into Visa and MasterCard — and we process that payment volume and provide all the risk management oversight of that. We earn basis points on the volume for that.
Sorbe: Our organization, roughly six or seven years ago, acquired an ACH company called Intercept and rebranded it KotaPay, and then built out a vertical supporting payroll processing for about 107,000 employers all over the country, … moving a lot of money via the ACH rails at scale. [As far as revenue, it’s mostly] transaction fees for moving money on clients’ behalf. But another important element of the monetization is the deposits it generates. We don’t offer Kotapay for the deposits, but our payments products generate meaningful deposit balances, with cost of funds that are usually meaningfully lower than if we went out and tried to raise that same amount of money across our footprint.
BD: Outside of fraud, what risks do you see in payments? Do you see stablecoins as a risk to payments?
Sorbe: I look at it as we’re in the 1.0 phase of stablecoin —it’s going to be bumpy, and some things aren’t going to go well. For me, I’m waiting to see what 2.0 looks like. I say that because you are going to see nefarious providers come in … and eventually some form of regulation around this thing. My thought is, let’s see what the next iteration looks like and make sure we’re ready for that. I don’t feel we have to chase stablecoin as it exists today. I may eat those words — hopefully, I retire before they prove me wrong. But in the end, I feel there’s a little too much chasing going on.
Seeterlin: There’s a risk around the amount of money that could leave the banking system. If the cash isn’t in the bank, it’s going to be a lot harder for us to lend against it.
The other thing about the risk in this space is disintermediation and banks abdicating their role in payments. I’m passionate about trying to make sure we stay involved and at the center for our customers, to help them and offer that safety as a regulated entity. It comes down to trying to figure out what problem it is that you’re trying to solve and focusing there.
Sorbe: I think there are more tangible risks than stablecoin. I worry about talent risk. We have operations in Sioux Falls, South Dakota, which … happens to be the card-issuing capital of the country. We’re fortunate enough to be able to find specific talents in payments. If I wasn’t in this area, that would be among my highest concerns. We can talk about regulatory risk all we want, but in the end, having people there to grow the business in a way that’s consistent with the strategy and is compliant … is going to continue to be harder and harder. And it’s not going to get all replaced by artificial intelligence.
BD: What advice do you have for other institutions when it comes to the optimal way to grow their payment services? What ideas or options do you think banks could implement?
Seeterlin: It’s absolutely debit card interchange opportunities on Day One. It’s leaning into treasury management opportunities, especially with businesses. Sit down with customers and understand where they’re struggling; attend their conferences to understand what they’re trying to do.
But then philosophically, go where your competitors aren’t and solve those problems. That’s what we did 30 years ago when we started Chesapeake Payment Systems: there wasn’t a lot of competition in the local merchant services space, and that gave us doors to open. Now there is, so we’re in wholesale sponsorship. We’re going where the competitors aren’t and finding ways to bring our community service model there.
Sorbe: Debit is, in my mind, an example of payment orchestration. … The degree to which you can think about being able to move money in different ways for customers is important. My advice would be to chart your strategy and be serious and committed to it.
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