The world of credit-card processing just got even more competitive for TSYS.
The Columbus-based processor said Tuesday it has been notified by Bank of America, one of its clients, that it will likely pull its merchant processing business at some point in the future.
That’s because Charlotte, N.C.-based Bank of America and one of TSYS’ prime processing rivals, Atlanta-based First Data Corp., announced Monday they are launching a new company to handle merchant processing. That includes services to small businesses, commercial and corporate clients around the globe.
No timeline was given by either Bank of America or First Data on when the venture — to be called Banc of America Merchant Services — will be up and running. The companies expect to release more details in earnings releases and calls in July and August.
“The combination of First Data’s world-class technology and industry experience with the power of Bank of America’s brand and branch referral channel will enhance Bank of America Merchant Services’ position as an efficient and innovative player in the payments market,” said Thomas Bell, chief strategy officer and president of First Data’s financial services business, in a statement.
Bell now becomes chief executive officer of the new company, which will be 46.5-percent owned by Bank of America and 48.5-percent owned by First Data.
The remaining 5 percent of the firm will be owned by Rockmount Investments LLC, a third-party investor.
TSYS handles accounting, settlement and authorization services for Bank of America under a contract that expires in April 2010. If a company breaks a contract, it typically pays a sizeable termination fee.
In an e-mail release Tuesday from spokesman Cyle Mims, TSYS said Bank of America comprised about 4 percent of its total revenues in 2008, and 4.6 percent of revenues in the first quarter of this year.
The Bank of America business translates to about 2 cents per share of TSYS’ projected earnings for 2009, the company said. It did not provide any dollar figures.
“TSYS will operate under the current contract until Bank of America informs TSYS of the changes to the merchant processing relationships,” the company said in its release.
This is the second time in recent years that TSYS’ revenues and earnings have been zapped by Bank of America. In 2006, the bank took away 45 million consumer card accounts from the Columbus company after purchasing the card issuer, MBNA Corp., in a $35 billion deal.
The loss of that large chunk of business, estimated then at nearly 11 percent of TSYS revenue, cost the card processor as much as $140 million in yearly revenue.
Bank of America said on Monday it now has roughly 240,000 merchant processing customers, while First Data has 140,000.
Combined, the firms estimate they will process more than 1 billion transactions each month.