Zions Bancorp. says the deal to sell its remote capture unit is a strategic move to leave an increasingly competitive business.

Zions' sale of its NetDeposit LLC unit is not a sign that it wants to get out of the banking technology market altogether. But though NetDeposit is considered a pioneer in remote capture, the competitive landscape has shifted in recent years. And where the technology was once sold mainly by independent payments software specialists, it is now widely sold by core banking providers that can easily offer it as an add-on feature for clients.

The Salt Lake City bank holding company said Tuesday it had agreed to sell most of NetDeposit's assets to the Las Vegas payments software vendor BankServ, a deal that would give the combined entity more heft to compete against core banking providers and the banking company a return on its investment.

"We found that this particular point in time was the right time to sell NetDeposit," said James Abbott, the director of investor relations at Zions. "We had built it to a significant platform over several years. We're one of the market leaders in that, and we felt that the rate of return was appropriate for Zions shareholders."

Danne Buchanan, NetDeposit's chief executive, said it had become more difficult for his company to compete against core banking providers, which can use their scale and extensive product lines to aggressively compete on price.

"I would say that, certainly, the core vendors have more levers they can pull when they say, 'I want a customer,' " he said. "Some of them will give away products like ours to compete with our banks."

Joining forces will let BankServ and NetDeposit expand their volume and reduce costs, he said. "We don't generally lose based upon, 'You don't have this feature or that feature,' that a core vendor has," he said.

Though Zions has been working to improve its capital position, Buchanan said he did not think this deal's main goal was to generate a "meaningful capital raise."

The companies did not disclose the deal's price. Zions said in its most recent annual report that NetDeposit had a $12 million loss in 2009, compared to an $18.1 million loss in 2008.

"We've invested a lot in new product development that BankServ will get the benefit of," Buchanan said. The "BankServ-NetDeposit consolidation is very, very profitable." The combined companies' will serve more than 100,000 business sites and more than 500 financial companies.

"To see them join forces like they'll be doing will certainly … cause them to give the core providers a run for their money, both in terms of their channel penetration and product breadth," said Bob Meara, a senior analyst at the market research firm Celent.

The deal comes as large technology vendors that specialize in selling core processing systems to banks, have been acquiring smaller companies that provide key add-on services like remote deposit capture.

For example, Fidelity National Information Services Inc. last year bought Metavante Technologies Inc., which offered remote deposit products and other payments software.

Zions is not entirely turning its back on technology. It will retain some of NetDeposit's assets related to medical claims processing, and according to its annual report, it owns a "significant position" in IdenTrust Inc., which sells identity authentication and fraud prevention services to banking, government and commercial entities.

Though Zions is focused on its core business, banking, "it's not a definitive statement that we're not going to be involved in doing anything on the technology side," Abbott said. "I wouldn't read one transaction as a wholesale shift."

BankServ, which was founded in 1996, and NetDeposit, formed in 1999, had discussed merging a few years ago, but a deal was never made, according to Buchanan and BankServ president and chief executive David Kvederis.

The companies revisited the idea this year, Kvederis said.

"It just seemed like the time was right this time around to try to make a deal come together," he said. BankServ and NetDeposit have specialities that fill in each other's product gaps, and little customer overlap, both executives said.

"The people that had bought their solutions and the banks that had bought our solutions [are] really different," Kvederis said.

BankServ is known for its small-business accounts receivable services, which are recognized for their ability to integrate easily with the QuickBooks and Peachtree small-business software, Celent's Meara said.

BankServ also operates as a service bureau to connect banks to the Federal Reserve's Fedwire service and services from Swift, formally known as the Society for Worldwide Interbank Financial Telecommunication. It also has more robust credit card processing services, Kvederis said.

NetDeposit, on the other hand, has established branch capture technology and has begun work on a mobile remote deposit capture service, said TowerGroup research director Nicole Sturgill.

"What really stuck out to me is, on the BankServ side, they definitely seem to be more business-focused, whereas NetDeposit" is more consumer-focused, Sturgill said. "Consumer remote deposit capture seems to be the next wave," she added.

BankServ and NetDeposit are "solid second-tier" players in the remote deposit capture market, Meara said, but are distant from the large core systems vendors in terms of their number of financial customers.

"They don't have the huge core banking and branch automation install-base that core providers have," he said. "Their combination is really going to bring them to kind of a new stature."

He said the company has not ruled out doing additional acquisitions, but he would not say what other technology or product areas it is interested in.

"I think we are very disciplined about what we are doing," Kvederis said.

The combined operation will process more than 80 million items per month or close to 1 billion per year, according to a BankServ spokesman.

Customers will include six of the top 10 banks ranked by deposits, according to Kvederis.

The companies expect the deal to close in the third quarter. Each plans to operate individually until early 2011. Buchanan is to oversee NetDeposit operations for the time being and take on a larger role in the combined company.

With the companies' respective product lines, they will be able to offer "one-stop shopping" for banks for remote deposit features, Kvederis said.

Mobile remote capture, a technology that lets a person make deposits by taking pictures of a check with a wireless device, is a "high focus," he said, but BankServ's philosophy is that the functionality of existing services need to be built out.

"It's got pizzazz and sex appeal, but the user experience isn't all that hot," Kvederis said. "We think that it's a great idea to have mobile applications," but "we think it will become more sophisticated, the user experience will improve and there will be even better products down the road."

The post-merger company will employ about 200, Kvederis said. BankServ's headquarters will remain in Las Vegas, but the combined company will also maintain NetDeposit's base in Salt Lake City.