1st Data-Chase Venture Wins Dillard Contract, Bumping National

Chase Merchant Services, a joint venture of Chase Manhattan Corp. and First Data Corp., has announced it will process Visa and MasterCard transactions for Dillard Department Stores Inc.

First Data will do the processing for Dillard, and Chase will own the relationship.

The five-year agreement is the latest in a series of signings for First Data, the merchant processing leader that has been steadily snatching customers like Dillard from rival National Processing Inc. First Data's alliances with large banks like Chase have helped it capture more processing clients.

Several factors persuaded Dillard to switch, said John Hawkins, vice president and treasurer of the Little Rock-based retailer.

"Pricing was a part of it, but we also looked at the relationship and technology services that Chase Merchant Services offered that National Processing could not," Mr. Hawkins said.

Dillard generates about $7 billion in annual sales. Its agreement with Chase encompasses transaction authorization and processing, settlement, and funding services.

Louisville, Ky.-based National Processing recently lost two other major accounts-Wal-Mart Stores Inc. and United Airlines-to First Data. Wal-Mart represented 4% of National Processing's business. The processor, a unit of National City Corp., saw profits fall 94% in the first quarter, after the departure of several prominent executives and a corporate reorganization.

John Leehy, executive vice president of merchant services at National Processing, said it has shifted focus to "the small retail market" and is recovering from its difficulties.

"Our national account business continues to grow and prosper, and that is our bread-and-butter business," he said.

The loss of Dillard was a hit National Processing can handle, Mr. Leehy said.

"Dillard is a terrific account, and we appreciated them as a customer," he said. "But even with our cost base, which is competitive with anyone in the business, there are certain deals that just do not make sense for us to do."

Richard Weingarten, a director at Salomon Brothers Inc. in New York, said National Processing had made some good business decisions, among them the purchase of Financial Alliance, an independent sales organization that makes processing arrangements with smaller merchants.

"There has been some pricing pressure in the national merchants that we don't seem to be seeing down in the smaller merchants," Mr. Weingarten said.

Michael Crocitto, vice president of marketing at Chase Merchant Services, said it works with merchants of all sizes, "from the small dry cleaner right up to" Wal-Mart.

Mr. Crocitto said Chase Merchant Services adds "serious value to a merchant by complementing processing with other areas of Chase Manhattan's business."

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