The Cutthroat Travelers Check Business

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The Cutthroat Travelers Check Business

NEW YORK--Two banking companies in the last few days have announced their withdrawal from the travelers check business amid signs that the already competitive industry is becoming even more cutthroat.

Barclays Bank PLC said on Wednesday that it is acquiring the travelers check operations of Chase Manhattan Corp., and last week RepublicBank Corp. in Dallas said it is turning its travelers check business over to Bank-America Corp.

Meanwhile, American Express Co. has started a big marketing push aimed at RepublicBank and Chase customers.

For the past few years, there has been little growth in the travelers check business, according to industry experts. So competition among issuers has intensified, forcing them to cut prices.

"I would say it's harder to make money," observed Kenneth C. Bignall, deputy divisional general manager at Barclays.

But he expects the worldwide market, estimated at about $40 billion, to grow 5% in the next year. "We have done this deal because we believe there is growth in this market," Mr. Bignall said.

Barclays' purchase of Chase's business will give the bank about 13% of the worldwide travelers check market, Mr. Bignall said.

Size is an important factor in the travelers check issuing business, and bigger operations enjoy advantages over smaller ones, according to industry experts.

Industry leader American Express may control as much as one-half of the market. Other major issuers are Thomas Cook Group Ltd., Citicorp, and BankAmerica Corp.

"Issuing" and "selling" are important distinction in the arcane world of travelers checks.

Issuers of travelers checks market the checks to sales agents, who, in turn, sell the checks to consumers. Issuers can provide different brands of travelers checks, such as American Express, Visa, and MasterCard.

A few banks--like Bank of America, Citibank, and Barclays--are both issuers and sellers.

Issuers make money by playing the float -- earning interest on the funds collected from travelers check sales until the checks are cashed in by consumers. Issuers are also responsible for the costly task of processing the checks. …