Make It 10: Fiserv Rolls along in FHLB Processing Purchases
Wade, Will, American Banker
Over the past decade or so every Federal Home Loan Bank with a check-processing services arm has sold it off.
In nearly every case, Fiserv Inc. has directly or indirectly come away as the buyer. On Monday it added one of the few exceptions, announcing a deal for the one owned by Home Loan Bank of Indianapolis.
The Brookfield, Wis., company closed the all-cash deal Friday. It would not say how much it paid.
"We believe that over the long haul the check-processing business is going to be a good business for Fiserv," said Leslie M. Muma, its president and CEO.
Through a series of deals dating back to 1991, Fiserv has acquired 10 of the 12 Home Loan banks' check-processing operations. The Boston bank never offered outsourced check processing, and the Cincinnati bank sold its business to Electronic Data Services Corp.
Fiserv says it is the largest third-party provider of such services, touching more than 10% of all the checks written in the United States. And though the Federal Reserve Board has been paring back check-processing operations as paper check volume has dwindled, now is a good time to be bulking up, Mr. Muma said Monday by telephone.
"I don't think there's any question that banks are looking more favorably at outsourcing," he said. In fact, he would consider buying more check-processing operations, he said.
Friday's purchase gave Fiserv its 49th check-processing facility in the United States, and its first in Indiana.
The Indianapolis bank processed about 65 million checks last year, generating $3 million of revenue. Fiserve processed 4.7 billion, generating more than $230 million, according to Steve Ward, an executive vice president.
"This will add minimally to our earnings, but the main thing for us is that it gives us a processing shop in Indiana," Mr. Muma said.
Two trends are prompting banks to consider outsourcing their check processing.
Online banking and electronic bill payment have cut the number of paper checks entering the payment processing system. …