Unisys threatens to pull out of cheque-clearing venture

Joint operation with Barclays, HSBC and Lloyds TSB is hitting margins...

The long-term future of the UK banking industry's biggest cheque-clearing organisation has been thrown into doubt after majority owner Unisys admitted it may be forced to sell its stake in the joint venture.

Three-quarters of the UK's cheque processing is outsourced to the Intelligent Processing Solutions (iPSL) joint venture set up in 2000 by Barclays, Lloyds TSB and Unisys. HSBC took a joint share in 2001 and iPSL now provides cheque-clearing services to other high street banks including HBOS.

But Unisys has admitted in its annual financial report that iPSL is "significantly impacting margins" and that the company is in discussions to renegotiate the joint venture.

A Unisys spokesperson told silicon.com this includes a full-range of options from selling its 51 per cent stake to buying out the other partners.

Declining cheque volumes were the driver behind the formation of iPSL, which aimed to consolidate the multiple operating sites and processes inherited from customer banks onto one common platform and set of processes.

But silicon.com understands from an industry source that iPSL has struggled to migrate customers onto a common platform.

The source said: "[iPSL] is crucial to the UK financial services industry but there are issues about its long-term sustainability. It hasn't managed to get all the banks onto common platforms and processes and so you have multiple participants doing their own things."

The transformation plan includes 120 separate projects, including implementing new cheque clearing platforms and building a single common technology system on Unisys ES7000 servers and Microsoft SQL databases. It is due to be completed by the end of the year.

Anders Maehre, senior analyst in the financial services technology team at Datamonitor, said consolidation onto a single platform is key to the success of any vendor-led business process outsourcing operation.

"Unisys is better placed to consolidate it across the banks. This is fundamentally what they know how to do better than the banks and you need to go towards that utility model or you won't make your margins," he said.

Barclays, HSBC and Lloyds TSB declined to comment on the Unisys announcement or on the future of iPSL.