In a digital world, it's hard to believe we still use checks. Then again, old habits die hard. We still write about 40 billion checks per year.
However, there is legislation, called Check 21, that is trying to get the U.S. checking system out of the 19th century. The Fool's Selena Maranjian recently wrote a great piece on this topic.
Basically, Check 21 allows banks to process checks without having physical possession of them; that is, merchants could digitally scan checks. The result will be huge savings for the major banks, such as Bank of America (NYSE:BAC) and Citigroup (NYSE:C).
Interestingly enough, Check 21 presents an opportunity for financial services software providers. In fact, there has been a variety of deals in the sector.
Yesterday, for example, Fiserv (NASDAQ:FISV) purchased CheckAGAIN, a leader in check conversion technologies. Compared with Fiserv (which has more than $3 billion in revenues), CheckAGAIN is a pip-squeak at $15 million in revenues. Yet with Fiserv's client list of more than 15,000, the company has an opportunity to leverage the growth from Check 21.
There are other deals, such as Metavante's purchase of VECTORsgi for $135 million. VECTORsgi is a leader in check imaging. So far this year, Metavante has spent more than $1 billion on such acquisitions.
With big players like Metavante and Fiserv, the consolidation is likely to continue.
So, are there pure-play public companies in the sector? One prospect is US Dataworks (AMEX:UDW). It's a small company, with a market cap of roughly $35 million. While such a company may scare off customers, this does not to appear to be the case with US Dataworks. After all, some of its customers include big names such as J.P. Morgan Chase (NYSE:JPM) and Computer Sciences (NYSE:CSC).
Fool contributor Tom Taulli does not own shares in the companies mentioned in this article.
