Citicorp Hires Perot Systems To Run Travel Payment Service

Citicorp has agreed to let Perot Systems Corp. operate a payment system that the banking company manages for the lodging industry.

The system is used mainly for delivering the commissions sent by Citicorp's hotel-chain clients to travel agents. The five-year-old Travel Agency Commission Settlement, or TACS, system handled about 5.2 million transactions last year.

The data processing agreement, whose financial terms were not disclosed, is typical of the "niche outsourcing" that banking companies are increasingly adopting.

"I think we realized from the client demand - the changes that were being requested - that we didn't possess the expertise in-house," said Thomas Edgerton, vice president and senior product director of Citibank Global Cash Management Services.

Perot Systems was selected based on its technical capabilities and knowledge of the travel industry, Mr. Edgerton said. It has a "unique set of skills that a typical bank is not going to have," he added.

The deal is the first in the banking industry for Perot since NationsBank Corp. scaled back an agreement with the vendor in April.

Perot has outsourcing relationships with eight banking companies. Another 10 have installed software from Perot.

The Citicorp deal is a "risk-reward" agreement that calls for the bank and Perot to share expenses as well as revenues generated by the system, said Brad A. Fred, Perot Systems' business manager for TACS.

"We wanted to structure a deal where both sides are compensated if the customer is happy," he said.

The structure is reminiscent of Perot Systems' alliance with Swiss Bank Corp., begun this year. Perot agreed to manage all technology services for Swiss Bank's U.S. investment unit, SBC Warburg. As part of the contract, Swiss Bank got an option to acquire up to 25% of Perot Systems' stock.

In the Citicorp arrangement, Perot Systems will collect information from individual hotels' computer systems. The hotels will "download information into a software package created by us and transmit it to our central site," Mr. Fred said.

The transmitted file consists of travel agency commissions that the hotels want to pay. In transferring funds, Citibank debits hotel accounts.

Perot will consolidate all the files so that "the travel agency receives one payment on behalf of a chain. They get one payment if we collect from 100 or 400 different properties in that chain," Mr. Fred said.

Along with the data processing and consolidation, Perot Systems will "provide solutions to hotel chains who want more information," Mr. Fred said. These solutions would include data warehousing and data mining applications that can give hotels new ways of handling guest information.

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