Unisys Corp., which co-owns and runs the operation that processes 75% of the paper checks in the United Kingdom, now has its first such assignment on the European continent, in the Netherlands.
It has taken over the paper item processing operation of Interpay, a Dutch consortium of seven large banks that also processes electronic transactions. The job should earn it $110 million over five years, Unisys said in announcing it Monday.
Interpay processes about 20% of all paper payments in the Netherlands, for those banks and 50 smaller ones, said Elton Birden, the managing director of Unisys Payment Services and Solutions, the subsidiary created for the job.
No such consortium exists in the United States, and Mr. Birden said it may be a few years before one is formed here. But an analyst for the TowerGroup research firm said the deal gives Unisys a better shot at being the processor if any is formed.
Meanwhile Unisys, of Blue Bell, Pa., is looking for more such business in Europe.
Two-and-a-half years ago it embarked on a strategy of taking over paper payment processing on the Continent, Mr. Birden said. Coincidentally, Interpay decided two years ago “that their core business was the electronic payment business,” he said. That gave Unisys an opening.
Belgium, where some Interpay banks have facilities, could be next, Mr. Birden said, and Unisys hopes to have similar contracts in several other European countries by the middle of next year. It also hopes to increase its share of Netherlands item processing, he said.
As in the United States, people in the United Kingdom and France write a lot of checks, Mr. Birden said. Fewer are written in the Netherlands, Belgium, Germany, and Austria, and volume is declining even there, so outsourcing is becoming more cost-effective.
The U.K. and Dutch jobs are structured differently. Unisys owns 51% of the U.K. consortium, Intelligent Processing Services Ltd.; HSBC, Lloyds, and Barclays own the rest, and many other banks are customers.
In the Netherlands, Unisys took over the item processing chunk of Interpay’s business, using the Interpay facilities in Leusden, and hired the approximately 130 employees who work there.
Interpay was formed in 1994 by the merger of three payment processors: Eurocard Netherlands, which processed credit card transactions, BeaNet a PIN-based debit transactions processor; and BankGiroCentrale, which handled paper checks for seven major Dutch banks.
Similar consortiums exist in Canada, and Unisys also does outsourced processing of paper checks in Australia.
In the United States, vendors and consultants have talked up the idea of check processing consortiums for years. As the use of paper checks slides, many say, banks are being forced to consider alternative processing arrangements, including outsourcing, to combat rising per-item expenses that result from fixed costs.
Under the consortium agreements, several banks consolidate all their check processing operations and hand over the day-to-day management. The consortiums typically let an outsourcer do the actual work at facilities belonging to at least one participating bank.
Robert Hunt, a senior analyst at TowerGroup, which is based in Needham, Mass., said it was natural for the Dutch consortium to follow the U.K. example in hiring Unisys. The 3 billion electronic transactions processed annually in the Netherlands dwarf Interpay’s 110 million paper payments, he said.
In the United States, by contrast, nearly 40 billion paper checks a year are processed, Mr. Hunt said. That could mean an opportunity for outsourcing providers such as Unisys, he said, and community banks would probably be the first to need item processing consortiums.
If large U.S. banks formed one to process their paper checks, they would need an outsourcer to oversee the job, Mr. Hunt said. “Logically, they’ll look to the outsourcers that have the most experience,” which in this country would likely include Unisys and also Electronic Data Systems Corp. of Plano, Tex., and Fiserv Inc. of Brookfield, Wis., he said.
Washington Mutual Inc. of Seattle was among the first big U.S. banking companies to outsource check processing — in a December 2002 deal with Unisys. Mr. Birden said that arrangement gives his company a foothold in outsourced check processing here and shows what it can do for U.S. banks.
