Inspired by the North American Free Trade Agreement, Diversified Investors Corp. has agreed to supply electronic switching and transaction processing for bank cards throughout Mexico.
The New York-based company will create a venture with a Mexican-led investment consortium.
The venture, International Financial Processing Corp., will be a multinational processor, using new microcomputer-based technology. Eventually, it plans to expand to Latin America, some Caribbean islands, Spain, and Portugal.
A spokesman for the Mexican processor said the company expects to sign up 10,000 merchants and 500,000 cardholders and to handle 12 million transactions in the first year. Even so, fewer than 5 million Mexicans own credit cards, out of the country's 85 million people.
"This will enable institutions, through our programs and joint venture, to issue their own private-label programs," said Philip S. Budin, chairman of Diversified Investors.
He explained that advanced technology would increase the likelihood of companies' issuing their own cards.
He also said that NAFTA had facilitated completion of the deal.
Credit card processing has typically been handled by mainframe computers. The new microcomputer-based systems will be less expensive and more userfriendly; they also can be more easily adapted for electronic funds transfer.
Mr. Budin cited Total System Services Inc., a Columbus, Ga., processor doing business in Mexico, as one company using mainframe technology.
He said his company would offer more flexible and customized systems for financial institutions and corporations. The system will offer "better service at a lesser price," he added.
Diversified Investors, through its subsidiary, Transaction Network Plus Inc., supplies credit and debit card processing to merchants and financial institutions in the United States.
Other U.S. processors in Mexico include Banc One Corp., Columbus, Ohio, in a joint venture with Banamex, Mexico's largest financial institution, and First Data Resources Inc., Omaha, Neb., which does joint processing with Bancomer and Multibanco.
Under Diversified's agreement, it is entitled to a minimum license fee of $1.2 million, of which it has received $650,000, as well as to a 20% equity stake in the joint venture.