SAN FRANCISCO - Wells Fargo & Co. is seriously considering hiring a company to run its check processing systems, according to sources.
The sources, who spoke on the condition that they not be named, said that Wells has been holding talks for months with technology vendors about hiring at least one of them to run its check processing systems. It could take many months for a deal to be struck, and there is no guarantee that one will be.
But the contract is being pursued by Electronic Data Systems Corp. and Fiserv Inc., each of which claims to be the country's largest nonbank processor of checks. Each also has a solid list of clients.
In March, for example, Chase Manhattan Corp. hired Brown Deer, Wis.- based Fiserv to run its check processing operations. EDS, based in Plano, Tex., handles check processing for some of the biggest thrifts on the West Coast, including Great Western Financial Corp.
Officials with Wells, EDS, and Fiserv declined to comment publicly. But privately, sources said that Wells is entering into the talks to see if a vendor can run its check processing systems less expensively than the bank can.
Another goal is to see if a vendor can help Wells adopt item image processing, the newest check sorting technology in which imaging hardware and software is used to improve check sorting efficiency and to sell new checking services.
Consultants specializing in bank technology warned that several big banks in recent years have held similar talks with vendors, only to decide that outsourcing wouldn't be beneficial either financially or strategically. Indeed, Chase is the only bank among the country's 25 largest that outsources all of its check processing operations.
But Wells is reputed to be more open to outsourcing than most banks. For instance, earlier this year it tapped Norwest Corp.'s home-loan unit to sell mortgages through Wells branches. Wells also has hired a unit of First Data Corp. to operate the credit card processing services it sells to merchants.
Furthermore, one source close to the matter said his company is "very, very optimistic" that it will land a check outsourcing contract with Wells.
"We are hot and heavy in negotiations," the source said. He added that the San Francisco company would be considered a marquee client because it is so highly regarded by its peers.
A deal with Wells Fargo could also be lucrative. Chase's contract with Fiserv lasts 12 years, and is reported to be worth $480 million. As part of the deal, 700 Chase employees were transferred to Fiserv payrolls, and Fiserv took control of four Chase check processing centers in New York that handle nearly 700 million items per year.
Wells Fargo appears to process more items. A Wells Fargo spokeswoman said the bank handles "a little over 5 million items per day." This works out to more than 1.8 billion checks per year.
Consultants said they had little doubt that Wells ranks among the 10 largest processors of checks in the country because Wells Fargo's lead bank at yearend was the country's sixth-biggest in deposits, with $42.4 billion. There is a rough correlation between the size of a bank's deposit base and the number of checks it processes.
