Continuing its move for market share in the competitive merchant processing business, First USA Inc. has acquired two independent sales organizations.

Electronic Processing Source Inc., based in New York, and NationalCard Processing Systems Inc. of Englewood, N.J., will be incorporated into First USA Merchant Services Inc.

"Our processing capabilities and product offerings will be expanded by acquiring the software for the merchant accounting systems owned by EPS and NationalCard," said Pamela H. Parsley, president and chief executive officer of First USA Merchant Services.

Over the past nine months, the nation's sixth-largest merchant processor has been in an acquiring mode. First USA purchased MAGroup Inc., a small company with 6,000 merchants and electronic draft capture technology. First USA also entered into a pact with Litle & Co. of Salem, N.H., a leading processor for direct-marketing firms.

"We're clearly committed to the credit card business, both the issuing and merchant sides," said Ms. Patsley.

The Dallas-based credit card institution was established in 1989, the result of a buyout from its original owner, MCorp. First USA Bank in Delaware ranked 11th among U.S. banks in card loans last year.

First USA reported $12.4 billion in merchant processing volume for the nine months ended March 31. The volume for all of 1993 was $13.3 billion, well over 1992's $7.9 billion.

'A Good Strategic Fit'

First USA has worked closely with the two newly acquired independent sales organizations.

"We knew both organizations and they were a good strategic fit for us, with our strategy of aggressively growing the merchant side of the business," Ms. Patsley said.

"If you're a portfolio owner, the only way to grow is to have salesmen on the street banging on doors or to buy a portfolio from a merchant bank or one controlled by an ISO," said Paul Martaus, president of Martaus & Associates. Clearwater, Fla.

ISOs - independent sales organizations - typically serve as middlemen between retailers and processing banks.

The rapid consolidation of the merchant business "will continue unabated," Mr. Martaus said, adding that First USA's pickups, while not huge, will increase its growth potential.

For the fiscal year ended June 30, the the acquired firms' combined merchant processing volume was approximately $2.4 billion. Under prior contracts, First USA handled $2 billion of that volume.

Niche Market Software

Ms. Patsley is particularly excited about the proprietary software the companies have developed for niche markets. NationalCard primarily serves upscale retail and performing arts organizations, and Electronic Processing Source caters to the restaurant and luxury hospitality industries.

Although the locations and sales forces of the two companies will remain intact, giving First USA a stronger East Coast presence, the technology and processing parts of their business will be merged with the main office in Dallas, making the new software available to all of First USA.

ISO's get their profits by charging retailers a little more than they pay for each transaction performed by merchant banks to which they route transactions. Now all that revenue will go directly to First USA.

But Ms. Paisley pointed out that decisions are not made on volume and income growth alone. The company looks for a competitive edge, sound financial decisions, and appropriate pricing characteristics.

"Acquisitions and opportunities that are strategic in nature and profit-enhancing clearly have value," she said.

Nabanco, National City Corp.'s National City Processing Co., and Card Establishment Services are the three largest merchant processors and First USA's major competition.

Although No. 1 Nabanco, a unit of First Financial Management Corp., Atlanta, reported $54 billion in credit card sales volume for 1993, Ms. Paisley said, "We feel we are competing very effectively in the market."

"We don't measure success solely in terms of volume, dollars, or items processed," she said. "We're focused on growing internally, enhancing our technology and productivity to continue being a low-cost provider of services."

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