Transaction Network Plus Inc., a New York-based point of sale processor, has signed a two-year service agreement with First Bank to provide credit card authorization services.

Doing business with First Bank, the sixth-largest merchant processor in the country, a unit of First Bank System Inc. of Minneapolis, lends credibility to the growing electronic funds transfer co

"It represents an expansion of transaction volume and the ability to serve one of the premier banks that acquires merchant transactions," said Charles B. Keil, president and chief executive officer of the budding front-end processor.

Initially, services will be provided in the New York metropolitan area, which includes New Jersey and Connecticut. Authorizations are expected to begin immediately.

First Bank represents "more than income, it's a good relationship," said Mr. Keil. He explained that Transaction Network Plus garnered the deal through a referral - one of First Bank's independent sales organizations that realized the need for debit at the point of sale.

"First Bank recognized that to remain competitive for accepting credit cards, they have to extend to merchants the ability to accept ATM cards," said Mr. Keil.

While First Bank's vice chairman, Philip G. Heasley, said that the financial institution looks forward to working with the provider, this is not an exclusive deal. Other front-end processors First Bank has relationships with include NDC, Ceridian, and By-pass.

"Until we get to [industry] standards, which we're a long way away from," Mr. Heasley said, "I think we have to do what satisfies our merchants."

Transaction Network Plus, owned by Diversified Investors Corp., was established in 1990, and originally processed credit card transactions for unattended fax machines and telephones. The company has grown into a point of sale service processor for retail merchants.

As the world of debit expands, Mr. Keil said the company has been building its base with smaller institutions that would like to have merchant debit programs. Customers include Chemical Bank, United Jersey Bank, Midlantic Bank, and others.

The New York company established a one-dial terminal that could process both credit and debit transactions. The process transfers transactions into the Visa, MasterCard, and NYCE systems.

Transaction Network said it is authorized to be a direct processor of transactions on the NYCE network in the New York area.

First Bank will have several thousand merchants accepting automated teller machine cards, including restaurants and retailers, over the next couple of months, said Mr. Keil.

He expects the company to process about 10,000 front-end transactions a month to start. While each transaction is worth only pennies, as volume increases it could represent high income for the company.

"As people become more used to ATM point of sale, usage will increase," he said.

Debit transactions will be switched to NYCE, while Visa and MasterCard transactions will be sent to MasterCard Automated Point of Purchase System, which processes credit card transactions for the Minneapolis bank.

Average monthly on-line debit transactions have grown 37% each year since 1991, according to POS News, a Chicago-based newsletter. The newsletter said those transactions may have grown by 60% in 1994.

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