Wells Fargo & Co. has agreed to let Fiserv Inc. handle a portion of its California check processing operation.

Under terms of the deal announced yesterday, the Milwaukee-based outsourcer will process checks from certain wholesale customers and from banks for whom Wells clears checks in California. The 12 other states in which Wells does business are not affected.

Hayden Watson, executive vice president of payment systems at Wells, said the deal should involve less than 10% of the bank's total processing volume.

Though Wells executives would not say how many checks the bank processes each year, observers placed the number at greater than 2 billion.

Executives at Wells and the Milwaukee-based outsourcer declined to disclose the value or duration of the contract.

Fiserv president, Leslie M. Muma, said in a printed statement said the agreement would help Wells in "facilitating the bank's transition plans with First Interstate." Wells and First Interstate merged earlier this year, and the two banks are in the process of integrating systems.

The deal is part of a trend in which banks increasingly are willing to hand over processing functions to technology services firms.

In the past, many of the nation's largest banks had prided themselves on self-reliance in all areas, but more institutions are seeing financial and strategic benefits in handing off commoditized services like check processing to outside companies.

Fiserv officials said the company will service Wells through four California processing centers. The company plans to hire 250 employees to handle the new volume.

Analysts said the deal has great significance for Fiserv, which has been battling for dominance of the check processing business with Electronic Data Systems Corp.

"This is a breakthrough piece of business for them, not in terms of money but in terms of profile," said Campbell K. Chaney, analyst at Rodman & Renshaw/Abaco in San Francisco. "It shows Fiserv's rising stature in the industry."

According to a study by Computer Based Solutions Inc. of New Orleans, only 4% of Fiserv's 5,000 bank clients in 1995 had over $1 billion in assets.

Last year, Fiserv struck a 12-year, $450 million check processing accord with Chase Manhattan Corp. only to see that deal fall apart after the New York giant's merger with Chemical Banking Corp.

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