Cardservicer Inc., a two-year-old company that sells credit card processing software, is planning to go head to head with the industry giants First Data Corp. and TSYS for a share of the U.S. market.
The company says that its first U.S. customer a womens discount clothing chain that runs a private-label card program will begin using its Horizon software for card processing next month. Cardservicer would not name the customer.
Chris Sullivan, the president and chief executive officer of Cardservicer, is also the head of instant-bank, a six-year-old software company that sells loan and lease processing software for the auto finance industry and counts GE Capital, Bank One Corp., ABN Amro Holding NV, GMAC, and National Westminster Bank as its clients.
The Horizon software was developed in 1998 in partnership with GE Capital, the financial services unit of General Electric Co., Mr. Sullivan said.
While Cardservicer is breaking into the U.S. market with a retail companys private-label portfolio, Mr. Sullivan said the software can and does handle bank portfolios as well. More than a dozen foreign banks already use it to manage their card portfolios, including Cardservicers largest client, Banco Superior of Bogota, Colombia, whose Visa/MasterCard portfolio has one million accounts, he said.
Horizon can handle the spectrum of tasks involved in managing a card portfolio, Mr. Sullivan said. He called it soup-to-nuts, end-to-end credit card processing software for an issuer, all the things a credit card issuer needs to be in business.
The Windows-based software features drop-down menus and screens that are easy to understand and navigate, Mr. Sullivan said. It also has many advantages over the International Business Machines Corp. mainframe technology that dominates the business, he said. Its difficult to enhance the mainframe platform. Ours is very flexible and lower in cost and quicker to enhance with functions.
Companies have moved their general ledger and accounting software off their mainframes, and the same thing will eventually happen in the credit card industry on a whole, he said.
As an example of how the software allows the user to be more flexible, Mr. Sullivan said that its collections segment could help a company create a more efficient call center.
The segment enables supervisors to plan exactly how their staff will work during the day, he said. They can move work around the organization any time during the day. They can look at workload at the group or individual level. They can prioritize by work type whether its account disputes, 30-day delinquencies they monitor and work with the customer service representatives by watching their screen activity.
Mr. Sullivan, who is originally from Great Britain, said he believed Horizon would be a viable additional offering to the U.S. banking market.
Industry analysts and consultants said they doubted the company would make much headway in the U.S. banking market against the 800-pound gorilla First Data. However, Cardservicers entry into the U.S. retail market was a wise and necessary choice, because of the difficulty in enticing banks of any size to use its software, they said.
Whereas First Data can manage a banks entire portfolio from issuance to customer service, Cardservicer maintains only the processing software on its own data facility. The retailer or banking company is in charge of the customer service, collections, and application processing.
I think that retailers is probably a pretty good field for them, because I think its a lot looser, said Theodore Iacobuzio, the director of research for consumer credit for TowerGroup of Needham, Mass. Its not as tightly sewn up as our bank outsourcers.
Paul Martaus, the president of the electronic payments consultancy Martaus & Associates of Mountainhome, Ark., said that the larger processors can handle card transactions very cheaply because of their enormous economies of scale.
Even if you buy a package like this, how do you know [Cardservicer is] going to stay in business? he asked. If they go away, you have a system that is unsupported. You have to worry about supporting the system forever.
In-house processing requires an enormous investment in people, Mr. Martaus said. You have to find a data processing manager who knows what hes doing. Its a whole ethereal process that transcends just buying a processor and putting it on your desk.
While Mr. Sullivan said his Windows-based software is more flexible than the more common mainframe system, Alanna Kellogg, the president of Kellogg Group in St. Louis, said the mainframe remains viable.
The mainframe systems have existed for years and years because theyre really good at what they do, which is process lots of transactions really quickly and really reliably, she said.
