Metavante Buys AFS And Becomes a Player in Image Exchange

Metavante Corp. announced today it has agreed to buy Advanced Financial Solutions Inc., an Oklahama City-based company specializing in check-processing technology and owner of the Endpoint Exchange, a network that routes electronic check images among processors and financial institutions. No price was announced, though Metavante officials said this acquisition, in combination with the purchase last month of The Kirchman Corp., a provider of core banking software, carries a cash purchase price of $305 million, subject to an earn-out in the case of AFS. The deal is expected to close in June. AFS becomes a subsidiary of Metavante, and AFS executives are expected to remain in their positions. With the AFS deal, Milwaukee-based Metavante vaults itself at once into the fast-developing market for check imaging and image exchange. The passage into law of the Check Clearing for the 21st Century Act (Check 21) last October lent impetus to image exchange among banks looking for ways to trade digital images of checks rather than paper items. The law, which confers legal status on substitute checks, or paper printouts of check images, takes effect Oct. 28, and at least four national image-exchange networks are under way to take advantage of an expected upsurge in image volumes. Of these, AFS's Endpoint Exchange is so far the only one that is live, routing 140,000 digital checks per day and projecting traffic of 1.2 million items daily by the end of July. “We see an open market,” says Michael D. Hayford, chief financial officer for Metavante. “There's going to be a shift in how you settle items, and [this acquisition] leaps Metavante from being a participant to a leader [in that shift].” Hayford says that while paper-check processing is at best a stagnant business, with check volume in a state of slow decline, “image exchange is really a growth market?[banks will] start to electronify and settle via the images.” By acquiring AFS, Metavante picks up an arsenal of check-processing and -imaging systems in addition to the image-exchange network, which has signed up more than 4,000 financial institutions, mostly community banks and credit unions, around the country. “This is all about filling in gaps in the product line,” says Hayford, who says that nearly all of AFS's 40 products have no counterpart at Metavante, a subsidiary of Marshall & Ilsley Corp. Metavante specializes in acquiring credit card transactions as well as processing ATM and automated clearing house transactions and electronic bill payments.