True to its motto, Wal-Mart Stores Inc. has been doing some "everyday low price" shopping of its own - for merchant processing.

Last week the biggest provider of credit card processing services to retailers, First Data Corp., announced a 10-year contract with the $100 billion retailer for transaction settlement.

The deal is a coup for First Data, which takes a big chunk of Wal-Mart business away from National Processing Co. of Louisville, Ky., the No. 2 company in merchant accounts. National Processing, controlled by National City Corp. of Cleveland, specializes in big-name national clients such as airlines.

National Processing also made an announcement last week, saying it had signed a five-year agreement with Wal-Mart to provide bank card authorizations. National Processing had done the retailer's front- and back-end processing, including statements and settlement, for 12 years.

The two parts of Wal-Mart's merchant processing will now be split, which an expert said will give Hackensack, N.J.-based First Data access to Wal- Mart customers for its USA Value Exchange network, which tracks consumer purchasing behavior for financial institutions.

Paul Martaus, president of Martaus & Associates, Clearwater, Fla., said National Processing has realized all along that it is vulnerable to attack from First Data but "did not take easily to losing this business."

Before First Data bought Nabanco and CES - in deals that made it the undisputed king of merchant processing - "companies like Wal-Mart and Kmart could barter back and forth for rate," Mr. Martaus said. Since then "there has been little comparative shopping."

Meanwhile, the deal will give First Data more scale, the ultimate advantage in merchant processing because it drives down per-transaction costs. Wal-Mart generates about five billion payment transactions annually at more than 2,500 outlets.

Tony G. Holcombe, president and chief executive officer of National Processing Co., said it had been in negotiations with Wal-Mart for months.

"We are disappointed losing this," he said. "It's always a business driven by price, and this has nothing to do with our service or quality."

Mr. Holcombe said National Processing got 4% of its revenue from Wal- Mart but did not lose "a hugely significant piece of the business."

He said the settlement portion of the contract amounted to three-fourths of Wal-Mart's business with National Processing, while authorization made up the remaining quarter.

Mr. Martaus said Wal-Mart will continue processing through both companies as "a test to see which one will work best."

"It's very significant, a nice marriage, to have the world's largest leader in retailing paired with the leader in credit card processing," said Roger Peirce, group president, Electronic Funds Services, First Data Card Services Group, Palo Alto, Calif.

Chase Manhattan Bank, set to offer a cobranded MasterCard with the Bentonville, Ark.-based retailer, will serve as the clearing bank for its Visa and MasterCard transactions.

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