Union Bank of California said it would team up with Transactive Corp. to bid for electronic benefits transfer business in California.

Contracts to deliver welfare and food stamp payments through electronic terminals to some 1.4 million recipient households are to be awarded county by county.

The alliance pairs a bank that has long expressed interest in serving the "unbanked" population with a leader in electronic benefits processing.

"We are looking for ways to serve the community," said Donna Hodgson, vice president and manager of government services for $29 billion-asset Union Bank, lead subsidiary of San Francisco-based Unionbancal Corp. She said the bank is "putting welfare clients back into the community."

"We attempted to identify the best possible partner," said Marc Palazzo, a spokesman for Transactive, which is based in Austin, Tex., and owned by Gtech Corp., the largest provider of electronic state lottery systems.

U.S. Treasury guidelines - which have been opposed by transaction processing specialists like Transactive - require that a bank be the primary contractor in bids like this. Even in state programs not governed by the federal rules, Transactive has routinely worked closely with financial institutions, said the company spokesman.

Transactive has won the biggest statewide contract to date, for Texas, and recently signed a contract with the Illinois Department of Public Aid. The company has routinely competed against bidding consortiums led by Citicorp or First Security Corp., Salt Lake City, and against processors such as Lockheed Marietta and Deluxe Data Systems.

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