Amsouth Bancorp. has joined the growing number of credit card issuers that are increasing their reliance on third-party processors.

The Birmingham, Ala., company said it will turn all its accounts over to Total System Services Inc. of Columbus, Ga.

Product of Expansion

Total System, the second-largest credit card processor, already, handles half of Amsouth's 475,000 accounts. The rest will be converted in May 1994.

"We're simply in a tremendous expansion mode now," said Jim Underwood, the bank's vice president for marketing. "This will free up a lot of people to do other things."

Terms of the multi-year agreement were not disclosed. But the bank is following some larger issuers that have turned to outsourcing to reduce costs.

In Final Stages

In late August, BankAmerica Corp., the nation's seventh largest card issuer, signed a letter of intent to use Total System.

According to M. Troy Woods, a Total System senior vice president, both the processor and BankAmerica are "negotiating down to the final stages" of that deal.

Total also was recently tapped to process Citicorp's business card - a first outsourcing by the No. 1 card-issuing bank.

Almost In-House

In addition, Total System has announced a joint venture with 13 Mexican banks, and a contract to handle processing on H&R Block's new cobranded card.

The H&R Block card is being issued by a unit of Synovus Financial Corp., which owns 80% of Total System.

Although banks gain economies of scale by allying with a third party processor, some say the trend toward outsourcing could quickly reverse if bankers start to feel they are losing control of their programs.

"It's cyclical," said Paul Martaus, president of Martaus & Associates. "Banks, when they start looking to save money, will outsource. Sometime down the pike, they might want an innovation and they'll have to share it or wait in line."

Control Is the Question

Many players will "feel a resurgence of |control your own destiny'" and take processing back in-house, he predicted.

Total System started processing for Amsouth about four years ago, said Mr. Woods. That relationship deepened when the bank purchased a sizable portfolio that was already being handled by the processor.

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