First Data Corp. announced two service contracts last week that illuminate the company's partnership strategy with banks and other marketers.
First Data's card services group in Omaha said it agreed to provide processing support to U.S. Bank of Oregon's merchant credit card business and to a cobranded credit card program of Fingerhut Corp.
Separately, First Data also said its revenues grew by 11%, or $162 million, to $1.7 billion, while net income climbed 20%, to $208 million or $1.87 a share.
The card services group, the leading processor for the bank credit card industry, was handling 92 million accounts at yearend, up from 70 million in 1993.
Two acquisitions of merchant processors - Card Establishment Services Inc. and Envoy Corp. - are due to be completed this quarter.
The Oregon contract is what First Data calls a "merchant bank alliance," an outgrowth of the CES acquisition, in which the company vowed to leave its client banks in control of their merchant relationships. First Data was trying to counteract the trend of merchant accounts' moving away from banks and toward third-party specialists like Nabanco and CES.
The "letter of intent" with the U.S. Bancorp subsidiary is conditioned on the completion of the CES deal, which is central to the alliance program.
That will make a new credit card system and updated technology for the 20,000 merchants served by U.S. Bank, which serves the West from its base in Portland.
"The alliance represents another step in our initiative to enhance our sales and service capabilities while improving corporate performance," said Robert D. Sznewajs, executive vice president of support and financial services for U.S. Bancorp.
First Data will be utilizing its customer service facility in Tulsa, Okla., to assist Minneapolis-based Fingerhut Financial Services Inc. with a cobranded credit card it has been testing for the past year.
The new card, issued by Providian Bancorp - a Providian Corp. subsidiary in San Francisco formerly known as First Deposit Corp. - should be available by the end of the first quarter. The company has not revealed the card brand or brands it will be offering.
Fingerhut, which specializes in direct marketing through catalogs and electronic media, sees the card as a step in its long-term plan to deliver financial products to the moderate-income sector.
"What we did served to change the dimension of credit card categories and the way issuers think in terms of service," said Ronald Zebeck, president of Fingerhut Financial Services.
Mr. Zebeck, who formerly worked at General Motors Corp. and launched its MasterCard with Household Bank, said he is relying entirely on outside support so Fingerhut can concentrate on what it does best.
"It used to be that banks did everything in-house," he said. I start from day one with a large infrastructure (from First Data) and inherit customer service people already knowledgeable about the business. I'm excited about it."
In its 1994 earnings report, First Data Corp. said revenues would have been up 20% if adjusted for the sale of some businesses and nonrecurring securities gains. It sold its cable services and hotel reservation businesses in the fourth quarter, gaining $21 million after taxes, and took $22 million in restructuring, severance, and other charges.
Revenue increases came from the three key business lines of card processing, payment instruments, and mutual fund processing.
"FDC benefited greatly from sales of enhanced services and new client signings in its financial sector businesses," said Ric Duques, chairman and chief executive officer.
The Hackensack, N.J., company expects net income growth again to exceed 20% this year.