Electronic Data Systems Corp.'s credit card processing unit has won a potentially lucrative contract with Household Credit Services Inc. to process the new General Motors MasterCard.
It comes as little surprise to many bankers that EDS -- a unit of General Motors Corp. -- would get the GM card's processing.
But the new outsourcing deal, which was announced last week at a credit card industry conference, is unquestionably the biggest thing to happen to EDS's card processing unit since it finished overhauling its computer systems last year.
A Million New Accounts Seen
Experts expect that GM's aggressive advertising and preapproved application campaigns will garner at least one million new accounts over the next year, a processing volume that instantly vaults EDS, based in Plano, Tex., into the upper echelon of credit card processors.
"We've been in the business of credit card processing for more than three years, but we haven't been as prominent a force in the industry as we would have liked," said Thomas R. Malin 3d, vice president in the payment services division at EDS.
"This contract, combined with a recent systems upgrade, gives us the muscle that we think will attract new business from many bankers."
To be sure, EDS still has a long way to go before it attains the market clout wielded by industry leaders First Data Resources Inc. and Total System Services Inc.
But with the GM deal, Dallas-based EDS has cracked the list of the top five card processors. And many observers feel EDS's brimming coffers and its reputation in other areas of bank processing will significantly improve the number of bank contracts it lands in the next few years.
"We're not quaking yet, but I'd be lying if I said we weren't looking over our shoulder a little more often these days," said an EDS competitor who requested anonymity.
Until recently, the fact that EDS was basing its credit and processing business on a credit card is issued by a nonbank might have hindered its ability to sign processing contracts with banks.
But, while there will probably always be some bad blood between the nation's largest credit card banks and their nonbank rivals, the issue no longer burns so hot for many of the smaller banks that typically rely on third-party processors.
"A nonbank like AT&T won't accept anything but the best from its processor, and their demands -- which are always met -- usually trickle down in the form of systems improvements to us," said Ronald Urquhart, a first vice president in consumer lending at Peoples' Bank, Bridgeport, Conn., the nation's 33rd-largest credit card lender and a Total Systems client.