Magazine article American Banker

New Chase May End Check Processing Deal with Fiserv

Magazine article American Banker

New Chase May End Check Processing Deal with Fiserv

Article excerpt

Fiserv Inc.'s $480 million check processing contract with Chase Manhattan Corp. may fall victim to the bank's pending merger with Chemical Banking Corp.

Industry sources say Chemical, which is the bigger bank, appears reluctant to relinquish control of its check operations.

With the 12-year contract that took effect March 1, 1995, Chase had broken new ground by agreeing to outsource what big banks had traditionally viewed as a crucial function.

Two approaches to check processing - in-house and outsourced - are unlikely to coexist because they would limit the merged bank's economies of scale.

Chase's agreement with Fiserv was viewed as a sign that large banks were coming to regard check processing as a commodity that could not differentiate their services from those of competitors.

Chase turned over to Fiserv its four check sorting centers in New York. The Milwaukee-based data processing company is also managing the installation of imaging technology from Unisys Corp. in those centers.

Fiserv's stock price fell by $2.375, or 7.8%, to $27.875 last Thursday, reflecting analysts' concerns that the company may lose the Chase contract. Late Friday afternoon the price was $27, down 87.5 cents.

Fiserv employs about 700 former Chase staffers and processes more than four million checks a day for the New York bank. Chemical's three check centers process about nine million a day.

Fiserv executives told securities analysts last week that they had not reached an agreement with Chemical about its status after the merger, which is scheduled to be completed late this month. …

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