BofA Hands FDC a Major Win, But Leaves Some Key Points Vague

First Data Corp.'s letter of intent with Bank of America Corp., which includes processing services from FDC for BofA ATMs as well as for debit card transactions secured by personal identification numbers, amounts to a big win for the Denver-based processor after a string of stinging losses, observers say. “Obviously, BofA's a big player and getting bigger in consumer payments,” says Ali Raza, vice president at Speer & Associates Inc., an Atlanta-based consultancy. Recently, JP. Morgan Chase & Co. notified FDC it planned to switch processing for its 87 million credit cards to TSYS Inc., a major competitor, en route to taking the business inhouse. And last year Star Systems Inc., the nation's largest electronic funds transfer network, lost two major issuers to the rival Interlink network, owned by Visa. Star was acquired a few months later as part of FDC's acquisition of Concord EFS Inc. But the BofA deal comes as a victory for FDC. “We're extremely pleased to expand and strengthen our relationship with Bank of America,” said Charlie Fote, chairman and chief executive of FDC, in a statement. According the announcement, the letter of intent extends an agreement for ATM processing through Star for a “majority” of BofA's ATMs, and initiates Star PIN debit processing for a “portion” of BofA's portfolio. Just how many ATMs and cards are involved in the deal was left unclear by the announcement, as was how or whether the deal affects BofA's participation in the NYCE network, in which it was one of several minority shareholders until Metavante Corp.'s acquisition of the network this summer. An FDC spokesperson could not give specifics, citing the letter of intent. Calls to BofA were not returned. As a result of its recent merger with Fleet Bank, BofA boasts about 16,000 ATMs nationally, along with a PIN debit card portfolio of about 9 million cards. Even before its merger with Fleet, BofA was the nation's largest ATM deployer and PIN debit card issuer. “It's not surprising FDC is chasing [BofA] aggressively,” says Speer's Raza. “There's only so many BofAs out there.” The letter of intent also includes other processing services, including remittance processing for credit card payments, plastics personalization for both credit and debit cards, and anti-fraud services. It also includes point-of-sale gear from Tasq Technology, a subsidiary of FDC, for BofA's merchant-acquiring business, which now includes Louisville, Ky.-based National Processing Inc. as the result of an acquisition announced this summer. The scope and breadth of the agreement did not surprise some observers. “FDC is looking to do enterprisewide deals,” says Raza.