Oberthur Smart Cards is teaming up with Electronic Data Systems Corp. to take on the U.S. card servicing market.
EDS, which supports credit and debit cards as part of its technology services to 3,000 financial institutions, is transferring the assets of two card-production facilities to the Oberthur unit in Los Angeles that was formerly known as Kirk Plastic.
Under a five-year cooperation agreement announced Nov. 17, EDS will maintain its client relationships, contracts, and customer service, with Oberthur taking over card manufacturing and personalization activities.
The transition process began immediately, with the companies stating their intention to jointly explore new-business opportunities, including smart cards.
Paul Rudolph, president of the EDS Electronic Business unit, said, "This is a powerful opportunity" to parlay "two ancillary card production facilities into an industry leadership position." Those facilities in Westlake, Ohio, and La Mirada, Calif., are responsible for five million embossed cards a year with associated storage, mailing, fulfillment, and other support.
That is a fraction of the 176 million plastic financial cards of all kinds that the parent company, Francois Charles Oberthur Group of France, manufactured internationally last year. According to The Nilson Report, Oberthur's total was second only to Schlumberger's 260 million.
Those companies are also active in the smart card market. EDS and Oberthur said their partnership could pay dividends in coming years as cards with integrated-circuit chips, already prevalent overseas, proliferate here.
"We look at this as an opportunity to grow our traditional business while partnering with EDS for smart card solutions," said Kirk Hyde, president and chief executive officer of Oberthur Smart Cards USA.
Oberthur, which began as a security printing company, lacks the name recognition of the other top card producers. Two years after it bought into the Americas by acquiring Kirk Plastic, the Kirk name has higher recall among U.S. industry veterans.
Oberthur officials say they are out to change that.
Oberthur is a leading supplier, through an alliance with chip card pioneer Groupe Bull, to banks in France and other European countries.
The company also has a highly regarded operating system for multiple applications and works with the major electronic cash brands, including Mondex, Proton, and Visa.
The Nilson Report said Oberthur, which includes manufacturing operations formerly owned by Bull, led the payment part of the chip card market last year, at 28.8 million cards. Its total chip card production was 72.8 million, trailing Gemplus of France (359.1), Schlumberger of the Netherlands Antilles and United States (284.1), and Giesecke & Devrient of Germany (73.1).
The EDS-Oberthur deal follows a similar realignment in card production announced in September by Gemplus and First Data Corp. Gemplus agreed to sell First Data Resources all but the smart card portion of a card personalization center in Shakopee, Minn., with 114 of 135 employees there switching employers.
Like EDS and Oberthur, those companies are mapping a potentially far- reaching alliance that includes smart cards and electronic commerce.
EDS of Plano, Tex., though larger than First Data and providing computer services to a wide variety of businesses, is a lesser factor in the card processing business. First Data serves a total of 200 million cardholder accounts; its closest rival, Total System Services Inc., is well over 100 million.
EDS, still expressing international ambitions in this segment, is around 35 million. Earlier this year it lost the business of First Union Corp. and its five million accounts to First Data.
EDS is certified by the MasterCard and Visa associations to support all their major products, and EDS is one of the system integrators participating in the Visa Smart program for chip card development. Mr. Rudolph's Electronic Business unit focuses on moving customers into what EDS calls "the global digital economy."
"This is an exciting opportunity for us to strengthen our relationship with one of the world's leading information technology service providers," said Philippe Tartavull, chief operating officer of Oberthur's U.S. company. "This alliance is in line with our strategy of partnering with large system integrators to provide a comprehensive range of magnetic stripe, memory, and smart card solutions."