On the eve of a new federal law that essentially will turn paper checks into electronic images once they reach the bank, analysts are predicting a boon to the companies that handle checks for banks and for the small banks that clear checks rapidly.
On Wednesday, shares of Fiserv which processes checks for 1,700 financial institutions nationwide, rose 2 percent to $35.40 and Bisys, a $1.7 billion back-office source for banks, saw its stock price rise 3 percent to $14.62.
Those companies, along with First Data, SunGuard and NCR, will benefit as banks turn to them to modernize their systems.
Though the changes won’t come overnight, the process will begin in earnest when the law takes effect.
“Check 21 is expected to ramp up gradually over time, and I think the big push is not going to happen until you get into 2005 and really probably the mid to the latter part of 2005,” said Les Muma, chief executive of Fiserv, in a conference call Oct. 22. “These contracts, these deals, are generally partnerships as opposed to straight outsourcing contracts, and they just take time.”
Only 25 percent of all checks are handled electronically, but 50 percent of financial services companies expect to switch to electronic imaging soon, according to a survey by the Association for Financial Professionals.
Small banks such as Commerce Bancorp, which process checks within a day should also benefit. They don’t depend on using the “float” — money drawn on an account but not deposited into another — to finance activities.
For this complete story, please visit Small Banks Will Get Lift from New Check Law.
