Fiserv Inc.'s $480 million check processing contract with Chase Manhattan Corp. may fall victim to the bank's pending merger with Chemical Banking Corp.

Industry sources say Chemical, which is the bigger bank, appears reluctant to relinquish control of its check operations.

With the 12-year contract that took effect March 1, 1995, Chase had broken new ground by agreeing to outsource what big banks had traditionally viewed as a crucial function.

Two approaches to check processing - in-house and outsourced - are unlikely to coexist because they would limit the merged bank's economies of scale.

Chase's agreement with Fiserv was viewed as a sign that large banks were coming to regard check processing as a commodity that could not differentiate their services from those of competitors.

Chase turned over to Fiserv its four check sorting centers in New York. The Milwaukee-based data processing company is also managing the installation of imaging technology from Unisys Corp. in those centers.

Fiserv's stock price fell by $2.375, or 7.8%, to $27.875 last Thursday, reflecting analysts' concerns that the company may lose the Chase contract. Late Friday afternoon the price was $27, down 87.5 cents.

Fiserv employs about 700 former Chase staffers and processes more than four million checks a day for the New York bank. Chemical's three check centers process about nine million a day.

Fiserv executives told securities analysts last week that they had not reached an agreement with Chemical about its status after the merger, which is scheduled to be completed late this month.

Merrill Lynch computer industry analyst Stephen McClellan said Fiserv is "somewhat less likely" to make a deal with Chemical as negotiations drag on. But he said Fiserv's stock decline was unwarranted because the company is in a "no-lose situation."

Fiserv would be entitled to "a huge penalty payment worth several years of profits," Mr. McClellan said.

George Dalton, Fiserv's chairman and chief executive, agreed with that assessment, but he stressed the negotiations with Chemical are continuing.

"There's a perception out there that this is bad news, but that's just not the case," Mr. Dalton said. "We don't want to make a living on penalties, and I guess that would be the only negative."

Mr. Dalton added that if Chemical decides against hiring Fiserv, it probably will retain some of Chase's check processing business for the foreseeable future.

A Chemical spokesman declined to comment on the negotiations with Fiserv, other than to say that no decision has been made.

Mr. Dalton said he was still upbeat about his Fiserv's prospects in the third-party check processing business, where Fiserv and Electronic Data Systems Corp. lead the field. He said Fiserv could land two or three contracts with large banks over the next few months.

Last August, American Banker reported that Wells Fargo & Co. was talking to Fiserv and EDS about farming out its item processing operations.

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