Bankers say that offering electronic payments services enables them to offer a variety of other for-fee features, while the arduous work of opening envelopes and sorting checks is becoming less viable, particularly as people write fewer of them.
This is especially true for retail lockboxes, which process consumers' payments to billers. And Citigroup Inc.'s deal last week to sell its entire operation to First Data Corp. shows that the same trends are starting to hit the wholesale business where business-to-business transactions are handled.
Amol Gupte, the head of Citi's North American treasury and trade solutions unit, said the New York company agreed to sell its retail and wholesale lockbox units to First Data in order to focus on more lucrative payments services, such as receivables management and information reporting.
He noted that lockbox sites typically have complicated machinery and extensive automated systems that need to be maintained, making them more like an industrial plant than a banking service. Citi concluded that lockbox "is a manufacturing business we did not want to be doing ourselves," Gupte said.
Earlier this month JPMorgan Chase & Co. sold its retail lockbox business to the payments processor Regulus Group LLC.
Barry Barretta, a principal at the Chicago consulting firm Treasury Strategies Inc., said the two deals signal an inflection point in the lockbox business, as more banks exit the market.
