Fiserv Inc. is continuing to expand its core processing and transaction services in areas where banks are pulling back.
The Brookfield, Wis., financial technology company announced Tuesday that it has agreed to buy the service bureau i_Tech Corp. from First Interstate BancSystem Inc. in Billings, Mont.
Fiserv said it expects the $40 million transaction to close Dec. 31.
i_Tech Corp. performs hosted core-account processing services for for First Interstate and 65 other clients, using Fiserv's ITI Premier application, and item processing, electronic funds transfer and other services for 150 financial companies, operating a fleet of more than 750 automated teller machines in 10 states.
Frank Smeal, the head of Fiserv ITI outsourcing, said the Billings data center is to become the seventh in Fiserv's nationwide network.
As part of the deal, he said, the company has signed a long-term contract with First Interstate.
This is Fiserv's second deal in six weeks involving a banking company shedding a service bureau. In early November, Fiserv bought Data Center in Grapevine, Tex., another licensee and reseller of the Fiserv ITI Premier system, from Banco Bilbao Vizcaya Argentaria SA's U.S. unit, BBVA Compass.
Mike Young, the president of Fiserv's bank and thrift division, said at the time that the purchase "broadens our distribution of the Premier product and gives us direct relationships with the clients."
Mr. Smeal said that, though Fiserv sells both outsourced core services and packaged software, the trend is more toward outsourcing these days.
He would not predict whether Fiserv would buy other such outsourcing operations but said, "we certainly hope that's the case."
Lyle Knight, First Interstate's president and chief executive officer, called the $6.5 billion-asset banking company's decision to sell i_Tech a strategic one. The two companies began discussions this year about a deal and about their visions for the future, he said.
Because i_Tech is a reseller of Fiserv ITI technology, First Interstate has been both a client and a competitor of Fiserv, Mr. Knight said. "We would have even more cutting-edge products and services from ITI and Fiserv at even more competitive prices if we were a good client rather than a good competitor," he said
The economic climate was not a factor in the decision, he said. "We make plans today to position this company to be competitive 20 years from now."
Montana, with its vast expanses and small, geographically scattered population, has long been a challenge for banking services. The Federal Reserve banks used the state as a test bed for a pioneering trial of check-image exchange in the 1990s, and Fiserv established an item processing center in Helena, Mont., in May 2006 after taking over an existing center that had been operated jointly by four banks.
Mr. Smeal said that, as image exchange has become more commonplace, Montana's unique qualities have become less distinctive.
"The trends that exist here are not uncommon with trends that exist all over the country," he said.
James Van Dyke, the president and founder of Javelin Strategy and Research in Pleasanton, Calif., said that Fiserv's recent deals could be a harbinger of things to come as banks retrench during the credit crisis and economic recession.
"In the current economic climate, bankers must stick to their knitting more than ever, just at the time when noncore business units can represent a much-appreciated source of capital," Mr. Van Dyke said. "In the months to come, the industry consolidation we're seeing may go beyond acquisitions by large banks and extend to technology vendors and service providers of all sizes as well."
