First Data Resources Inc., by far the biggest independent processor of bank credit card accounts, moved to bulk up even more last week by agreeing to acquire Credit Systems Inc. of St. Louis.

Credit Systems, created in 1967 as the first of 14 regional processors for what was then the Master Charge system, will be the last of those multibank associations to be acquired.

Like other associations from that era, Credit Systems began as a not-for-profit utility for member banks. It was reorganized in 1990 as a for-profit stock company, owned by Boatmen's Bancshares Inc. of St. Louis, Mercantile Bancorp. of St. Louis, and United Missouri Bancshares Inc. of Kansas City.

"CSI is the last of the bank cooperatives," said David Robertson, president of The Nilson Report, an Oxnard, Calif. newsletter. He said Credit Services ranks eighth on the list of third-party card processors. No. 1 is First Data Resources, the Omaha-based unit of First Data Corp.

Gaining Market Share

First Data, which will add two million Credit Systems card accounts and 90,000 merchants to its base of 66 million accounts and one million merchants, gained market share in the 1970s and 1980s by buying up the likes Eastern States Bankcard Association in New York, Southeast Bankcard Association in Georgia, and Mountain States Bankcard Association in Colorado.

During much of that time, First Data was controlled and backed by American Express Co.

The processor's closest rival is Total System Services Inc. of Columbus, Ga., a subsidiary of Synovus Financial Corp., handling 32 million cardholder accounts and 258,000 merchants.

Not Big Enough

"This is a scale business," said W. Randolph Adams, chairman of Credit Systems' board and executive vice president of Mercantile Bancorp.

"Even though we were a large processor, comparatively speaking, we weren't large enough to sustain the amount of investment needed to bring the business forward to the next generation," Mr. Adams said.

He said First Data and its technology will allow Credit Systems' users to respond more quickly to market changes.

"The concept of not-for-profit associations has pretty much gone by the wayside," said J. Michael Parks, president and chief operating officer of First Data Resources. "It was a good way to share cost, but in the long run it hasn't fulfilled the needs."

Achieving Competitive Pricing

"It's necessary to add significant volume to the processing base to provide competitive pricing to the banks we process for," said Philip E. Sattler, president and chief executive officer of Credit Systems. "First Data Resources is the largest processor in the world, with tremendous economies of scale."

Last May, First Data acquired the last remaining nonprofit processor, Atlantic States Bankcard Association of Raleigh, N.C., gaining 2.2 million accounts for 150 banks.

Mr. Robertson said the only association left that could give First Data competition is Southwestern States Bankcard Association, which MBNA America Bank, Newark, Del., acquired in 1991.

Acquisitions Possible

"Now the battle is over existing portfolios operated inhouse," Mr. Robertson said. Petroleum companies with proprietary card programs are an obvious target, he added, and offer substantial portfolios.

"Our continued thrust will be growing the customer base," Mr. Parks said. "If that includes acquisitions, fine."

Mr. Sattler said Credit Systems worked out an arrangement with First Data to keep some of its 340 employees.

Credit Systems will be a presence in the St. Louis area for at least as long as the conversion takes, Mr. Sattler added.

The acquisition will leave intact Monetary Transfer System, a joint venture of Boatmen's, Mercantile, and United Missouri that owns and operates BankMate the 12th-largest regional automated teller machine network. First Data will take responsibility for the processing services that Credit Systems currently provides.

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