SPS Payment Systems Inc. has agreed to provide credit card services for the U.S. Army's two-year-old private label program, known as Esprit.
Under terms of the agreement, Riverwoods, Ill.-based SPS will act as a subcontractor to Club Card Corp., an automated billing company that is the primary contractor for the Esprit program.
Worldwide Use
Though still in a test phase, Esprit is expected to bring about eight million transactions to SPS when fully implemented in 1997. The program could grow significantly beyond that if it is expanded to the Air Force, Navy, and Marines.
SPS, a leading transaction processor and private-label card program manager, will handle transaction authorization, card issuance, statement processing, customer service, and collections for Esprit. The cards are used for purchases and for clubmember identification on Army bases worldwide.
The company will also install point of sale terminals at all Army installations and give Esprit's central office electronic mail and account inquiry capabilities.
Dovetailing with Strategy
"For SPS, the program represents an expansion of its strategy to extend its services into nontraditional areas, including government and health care," said Robert W. Archer, senior vice president.
When fully operational, the program is expected to comprise more than 10%of SPS' privatelabel outsourcing business, Mr. Archer said: The Army, which would be SPS' third-largest outsourcing client, is expected to generate about 3.5 million bills per year.
While separate from the main line of private-label services in which SPS takes a direct hand in managing card receivables, the outsourcing business is nonetheless an important part of SPS' future, executives said.
"We see a major part of our growth in the outsourcing area," said Christopher Craig, national account manager, "so we are always looking for the niche Stuff."
The niche areas, such as government and health care contracts, may become an important pan of SPS' future if the other areas of the private-label service business stagnate in coming years, as analysts have predicted.
A report on the transactionprocessing business from Montgomery Securities analyst Richard K. Weingarten noted that private-label "is a difficult market to penetrate."
