Citicorp Revamping Card Unit

NEW YORK -- Citicorp, struggling to remain profitable in a business most banks have abandoned, is reorganizing the group that provides credit-card processing to retailers.

The unit, Citicorp Establishment Services, is an unglamorous but key component of the bank's high-profile credit card operations. Its basic function is to route receipts and payments for merchants that accept bank cards.

In the past two weeks, Citicorp has merged the card unit into Citicorp POS Information Services, which itself is gasping for survival.

The point-of-sale unit, which attempts to sell merchants data gathered from supermarket checkout counters, has been called one of the bank's biggest technology follies.

Now Based in Different States

By combining the two units -- which are based in different states -- Citicorp hopes to increase the point-of-sale unit's marketing clout and the processing unit's customer base, market sources theorized.

The transition has not been easy.

Card industry sources expressed surprise on hearing that Bruce M. Weber, the president of Citicorp Establishment Services for about four years, had left the bank. Mr. Weber could not be reached for comment.

A bank spokesman confirmed that Mr. Weber left partly as a result of the "internal merger" of the two units. Mr. Weber's responsibilities have been assumed by Bert Einloth, a one-time General Foods executive who heads the ailing point-of-sale unit.

Mr. Einloth now reports directly to James L. Bailey, Citicorp's head of U.S. card products. Mr. Einloth previously was part of the company's bedeviled information sector.

New Chief Known as Marketer

Industry sources said Mr. Weber is a specialist in the basics of the back-office business whereas Mr. Einloth, 52, has more of a reputation as a marketing theorist.

The bank spokesman said no decision has been made about where the combined unit will be based, how many people it will employ, or what it will be called. The card processing business, which employs 350 people, is based in Melville, N.Y., while the point-of-sale business employs 220 people in Stamford, Conn.

The spokesman said he did not know if the consolidation will result in layoffs.

Citicorp Establishment Services is the nation's third-largest processor of bank card transactions for retailers. It handles about $23.3 billion in card sales for 97,000 merchants.

Many Banks Quit Business

Citicorp gets high grades from competitors for its processing efficiency. But the business, known as merchant processing, is notorious for its low profitability.

Most of Citicorp's competitors in the credit card business -- including First Chicago Corp., Chase Manhattan Corp., and Manufacturers Hanover Corp. -- have exited merchant processing in recent years. Citicorp's principal competition consists of nonbank technology firms such as NaBanco, National Data Corp., and First Data Resources.

Keeping Up with Rivals

By merging the processing unit with the point-of-sale unit, Citicorp is trying to keep up with some of those firms, experts suggested.

"To compete in the [merchant processing] business down the road, you have to have expansive knowledge of merchant's needs, including what Citi was doing at Stamford," said David Robertson of The Nilson Report, an industry newsletter.

In the third quarter, Citicorp took a $30 million charge in connection with its point-of-sale business.

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