Despite losing First Union's credit card processing business to First Data Corp., Electronic Data Systems Corp. has grand ambitions.
"Our goal is to be the No. 1 global card processor," said Frank E. Accettulli, an EDS spokesman. "I'm talking about the world."
The goal is a far off one for EDS, which ranks a distant third among card processors on the issuing side. First Data is the nation's largest processor, and Total System Services Inc. comes in second.
Last week, First Union Corp. announced it was moving its five million credit card accounts from EDS to First Data. Though EDS of Plano, Tex., said in a statement it was "disappointed to lose a valuable piece of business," the company's nine-year-old card processing unit is taking a long view, hoping to pick up accounts overseas and from domestic banks that do their own processing.
First Data, meanwhile, called the First Union account "a very large win" for its Omaha card services unit. First Union, with about $6 billion of credit card receivables, ranks 14th among bank card issuers, according to The Nilson Report, and had been a client of EDS since 1993.
"If you look at the top 25 issuers in the bank card marketplace today, 13 of those are First Data clients," said Richard A. Zehnacker, managing director of business development for First Data Card Services. Another four, he said, are clients of Total System, and some others do their processing in-house.
Mr. Zehnacker said First Data hopes its business will grow as existing customers enlarge their portfolios. Banks that do not outsource card processing also "provide a significant amount of opportunity for First Data going forward," he said.
Leaving aside its top-ranking merchant services unit, First Data processes 189.6 million card accounts, 20 million of which are international ones, the company said. EDS said it has 33 million card accounts (including the First Union portfolio), of which 15 million are international.
Without First Union's business, EDS' chief domestic account will be the General Motors card portfolio of Household Bank, which EDS inherited from its days as a subsidiary of the automaker.
Mr. Accettulli said EDS shares First Data's goal of capturing business from large banks that process in-house. EDS also hopes to take advantage of its presence in 45 countries and already does card processing work in 21 of them.
"We're looking for international expansion, not only to compete but to dominate," Mr. Accettulli asserted. Unlike its competitors in card processing, "we have people on the ground in all of those countries."
First Data also has large international ambitions, Mr. Zehnacker said. It services "a significant amount of the marketplace in the United Kingdom," is building a processing center in Hong Kong, and is making inroads in Germany, he said.
EDS' aspirations struck some industry observers as surprisingly bold. Card processing is a tiny piece of EDS' business-it falls within the company's financial services unit, which produces 15% of overall revenue- and the outsourcing giant has been grappling with disappointing earnings.
Patrick Burton, an analyst at Lehman Brothers, said EDS "spent a long time at their investors' meeting talking about electronic commerce, and that's much more up their alley than the card world."
Noting the more than 150 million card accounts that EDS would have to pick up to overtake First Data, Mr. Burton said, "I don't think there are that many cards out there to be had. Card processing is a pretty mature, price-sensitive business, and as banks get bigger through consolidation, they can exert even more pressure on pricing."
Mr. Burton said he suspected a handsome pricing deal had lured First Union to First Data. First Union officials would not comment.
"Domestically, I'm very concerned that the rate of card growth has slowed due to saturation," Mr. Burton said. "International has been everybody's problem-solver to the slowing in the domestic market-First Data has been saying the same things EDS said."
But "the problem internationally is that most business is controlled by banks or consortiums of banks that are much less likely to outsource, especially to a foreign provider," Mr. Burton said.
Richard K. Weingarten, a director at Salomon Smith Barney, expressed greater optimism. Though EDS should not "expect to be a major player domestically," the international marketplace outside the United Kingdom is "pretty fragmented."
Mr. Weingarten said perhaps EDS "can get in a newer ball game and do better" but added that First Data "does have a leg up in the international marketplace, given all the experience they have here in the United States."
EDS seems to gain some business by riding the coattails of other units. For instance, last August it won a plum contract with Commonwealth Bank of Australia, a 10-year, $3.8 billion deal in which the outsourcing company is running all the bank's information technology functions. Included in the package was credit card processing, which, Mr. Accettulli pointed out, had previously been done by First Data.
Mr. Accettulli said it might take 25 years for EDS to achieve its goal. "The chess game is with First Data; it's not with the banks," he said.