Vital's Bank Deal Heats Up Fight for Merchant-Acquiring Lead

Vital Processing Services announced a customer signing this week that it said boosts its already strong momentum in the battle for merchant- acquiring supremacy.

First Premier Bank of Sioux Falls, S.D., bought what Vital calls a "complete turnkey processing solution." The bank is making its second run at credit card merchant services after a retreat several years ago and will rely on Vital for every aspect of the operation except the basic banking relationships.

"They said they want to do what they do best and turnkey the rest," said Vital president and chief executive officer Fred Gumbel, in an interview during the American Bankers Association bank card conference.

The move by First Premier exemplifies a trend that has Vital, its market-leading foe First Data Corp., the National Data Corp.-MasterCard joint venture Global Payment Systems, and other processors scrambling for pieces of a growing pie. Vital is owned by Visa U.S.A. and Total System Services Inc., which in turn is bank controlled.

At $300 million of assets, First Premier would have little hope of being as efficient on its own as Tempe, Ariz.-based Vital and the other leaders.

The South Dakota bank, which had sold its previous portfolio to First Data, now joins in the growing movement to reclaim merchant accounts from the transaction processing specialists.

Miles Beacom, president of First Premier's credit card division, said, "We want to be at the forefront of the market with Vital because they don't compete with us for our merchant business"-an obvious reference to First Data and its merchant bank alliances.

First Data electronic funds services president Roger Peirce said those alliances should be credited for a three-percentage-point gain since 1995 in banks' share of the acquiring market, to 49%.

Mr. Gumbel only conceded "clever positioning. The bank may be the sponsor on a contract, but who gets the income?" First Data is in "direct competition with its customers."

This rousing rivalry played out in other ways at the ABA meeting. First Data headlined its party Monday night with Kenny Loggins; Total System had Jay Leno. First Data also put on an impressive technological display that included a demonstration of the bill presentment system being developed by MSFDC, its joint venture with Microsoft Corp.

First Data said Advanta Corp., a bank card processing client since 1990, has renewed its contract for seven years.

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