bought into Nova Information Systems Inc. and signed up for it to take over their merchant processing. The deal boosts Nova's stature on the merchant side of the bank card business, effectively making it the eighth-largest in processing volume. Previously, Atlanta-based Nova was ranked 12th. Four other nonbank companies - Nabanco, First Data Corp., First USA, and National Data Corp. - are among the top 10 in merchant processing contracts, according to The Nilson Report, an Oxnard, Calif.-based newsletter. And the big are getting bigger: Nabanco's parent, First Financial Management Corp., merged last week with First Data, putting No. 1 and No. 3 under the same corporate umbrella. Nova said that with the portfolios of First Union and First Fidelity - banks that announced their merger deal in June - it will process $12 billion annually in bank card sales and serve more than 90,000 merchants. "Efficiencies of scale, state-of-the-art technology, and a robust product offering are critical for success in this marketplace," said Fred Winkler, senior vice president of $86 billion-asset First Union of Charlotte, N.C. "This strategic partnership underlines our commitment to the merchant- acquiring business and positions us for long-term growth and success," Mr. Winkler said. Nova, First Union, and First Fidelity did not disclose the terms of their "partnership" except to say they had acquired an equity interest in Nova and get seats on its board. The $35 billion-asset First Union, which has been processing card sales for merchants since 1968, contributes about $3.4 billion in annual volume. New Jersey-based First Fidelity, in the business about 20 years, said its 1994 merchant sales surpassed $1.5 billion. First Union and Nova said they began talks in midsummer, and First Fidelity came in later. Jim Fitzgerald, First Fidelity's executive vice president and head of consumer lending, said, "We were looking at a process very similar to what First Union was prior to the acquisition. We both felt we needed to do something of this nature." Mr. Fitzgerald added, "First Union was much further down the track with Nova than we were in discussions with another party," which he would not identify. "It made a lot of sense for us to view where they were and to marry up." Edward Grzedzinski, Nova's chief executive, said "First Union began looking around for a partner to help them grow their technology business. They were looking along the lines of a traditional joint venture." He said that Nova was able to "respond and made a more creative offer along the lines of a true partnership." First Union had been Nova's banker since its formation four years ago, but Mr. Grzedzinski said this was "purely coincidental" to the merger agreement. Fred White, a principal at First Annapolis Consulting in Annapolis, Md., portrayed the deal as "an illustration of the continuing partnering and outsourcing trend by banks. First Data has been going around doing deals like this" for some time, he said. He added that merchant processing "was more or less a neglected banking business" and "companies like Nova now see a lot of value in it." Mr. Winkler said First Union's decision to make merchant processing a priority resulted from a far-reaching strategic reassessment. "We needed to outsource or do a joint venture" and Nova made all the right moves to gain the bank's support, Mr. Winkler said. Nova signaled its intent to be a bigger player last November when it purchased Boulder BankCard Processing, a division of Bank of Boulder, Colo. Nova, originally called Innova, was cofounded in 1991 by Mr. Grzedzinski and William Kinard. Mr. Kinard, who came from National Data Corp., later left to join First Data.

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