Nova Information Systems Inc. has purchased a $1 billion merchant processing portfolio from MBNA Corp.
The accounts come from MBNA's portfolio of affinity group customers, many of them doctors, lawyers, and accountants.
The deal, which closed in December, expanded Nova's relationship with MBNA, which began in 1992 when Nova purchased a $1.4 billion portfolio of general retail merchants.
The recent transaction included a 10-year exclusive marketing arrangement between the companies. Nova will provide payment processing services to merchant accounts originated through MBNA.
In 1992, "MBNA gave Nova its first major acquisition opportunity," said David W. Nelms, vice chairman of MBNA, based in Wilmington, Del. "Five years later, Nova has become a premier provider of merchant payment services and we are pleased to expand our relationship with them."
Edward Grzedzinski, chairman and chief executive officer of Atlanta- based Nova, said the new addition would "help us gain access to the professional services community which, we believe, is an attractive and growing market niche for electronic payment services."
The relationship between MBNA and Nova may send a signal to other banks that are deciding what role they want to play in the merchant-acquiring business. Banc One Corp., for example, is trying to decide what to do with Paymentech Inc., which came with the acquisition last year of the monoline credit card issuer First USA.
Some banks that have exited the merchant business are reconsidering, eyeing alliances with processors like Nova and First Data Corp. as options.
"What MBNA is doing with Nova is entirely similar to what other banks are doing," said Franco Turrinelli, a research analyst for William Blair & Co. in Chicago.
Last spring Richmond, Va.-based Crestar Bank sold its $1.8 billion portfolio to Nova. In late 1997, Firstar Corp. in Milwaukee and Cleveland- based KeyCorp announced plans to form joint ventures with the processor.
"MBNA wants to continue to be involved in merchant-acquiring, but they don't feel they need to be the actual processor," Mr. Turrinelli said.
James Shanahan, a partner of Business Dynamics Consulting of Nyack, N.Y., said Nova offers the scale of products and services that a company like MBNA desires, and the outsourcing arrangement lets the card issuer concentrate on more central business matters.
"MBNA is clearly a company that is focused on the card-issuing business, and this is what drives the vast majority of profits," said Mr. Shanahan, who recently moved to Newark, Del., to open a branch of his firm. Compared to MBNA's other concerns, processing "is like a fly on an elephant."
