Chicago Home Loan Bank Sells a Business to Fiserv
With profit margins shrinking, the Federal Home Loan Bank of Chicago has sold its check processing business to Fiserv Inc.
Bank officials said a sizable investment in technology is needed to support the business.
Accord on Marketing
Under terms of the agreement, reached Thursday, Fiserv will take over the processing operations at the bank's facility in Chicago. The bank will continue to market and sell the services to its customers.
The value of the contract was not disclosed.
Earnings of the Federal Home Loan Banks have fallen considerably in recent months. Like many financial institutions in the private sector, the Chicago bank has been searching for ways to cut costs.
Pressure from the Top
That effort has been supported and perhaps inspired by the Federal Housing Finance Board, which oversees the 12 Home Loan banks and has pushed them to streamline back offices.
But officials at the Chicago bank said pressure from the Finance Board played only a small role in the decision.
Imaging on the Horizon
"We've been looking at this since the beginning of the year," said Robert F. Benzer, a senior vice president. "Competition for customers is fierce, and our volume has decreased for the first time in 10 years, so we thought it was time for a change."
To compete effectively for business, item processors will almost certainly need to make huge investments in image processing technology over the next few years, Mr. Benzer said. Officials of the Chicago bank realized it could not garner the resources necessary for such investment.
With the acquisition, Fiserv will add 91 financial institutions to its list of 800 clients while increasing volume by 60 million transactions annually.
Fiserv, which this month reported big increases in revenue and net, now processes about 1.2 billion transactions a year.
Building a Network
The new Chicago contract is the second Home Loan bank agreement for Milwaukee-based Fiserv and its third major check processing acquisition this year.
Fiserv has been eagerly pursuing these businesses to establish a network of check processing utility centers, which eventually would offer image-based check processing services.
"We are trying to achieve a critical mass that will allow us to keep the per-item costs low when we start offering image-based processing," said Kevin Kasper, vice president at Fiserv.
The addition of the Chicago Home Loan Bank's site brings Fiserv's total number of check processing facilities to 17.
