For a decade, IBAA Bancard has relied on Equifax for processing and marketing support. The two have become a formidable force in credit cards.

When IBAA Bancard Inc. renewed its five-year contract with Equifax Card Services, it underscored how this cooperative arrangement has kept community bankers competitive in the credit card industry.

"In 10 years, we have achieved collectively what individually we wouldn't have been able to do otherwise," said David Ballweg, president of Community State Bank in Wisconsin and chairman of IBAA Bancard.

"Critics said community banks were too small, but 1,600 have signed up, with more than two million cards and $2 billion sales volume," Mr. Ballweg added. "We've proved to be formidable."

Lee A. Kennedy, president of Tampa, Fla.-based Equifax Card Services, remembers the days before the partnership, when few independent banks were issuers.

Mr. Kennedy, a 44-year-old native of Yardley, Pa., began working with small banks as a service representative for a non-profit bank service bureau in Florida in the late 1960s. He worked his way through sales, operations, systems, programming, and data processing to become general manager.

In 1976, Telecredit Service Center Inc., Tampa, bought the cooperative, Florida Credit Service Center, and Mr. Kennedy rose to president in 1980. Five years later, Telecredit-made its group processing deal with IBAA Bancard, a for-profit affiliate of the Independent Bankers Association of America.

"We've always really concentrated our businesses on the small- to medium-size independent institution," Mr. Kennedy said. "That's been our charter and the focus of our marketplace for a long time.

"In the early days of the partnership, there were very few independent institutions that were really players in the credit card market, if any at. all," he added. "IBAA and IBAA Bancard really changed that."

Telecredit, which was acquired in 1990 by Equifax Inc., the Atlanta-based credit reporting company, has worked with IBAA Bancard since its start, providing card processing and customer service. But the partnership has evolved into something more symbiotic.

Equifax Card Services plays a behind-the-scenes role with almost every product or service IBAA Bancard offers its member banks. The products include the full range of standard, gold, business, and debit cards, of both the MasterCard and Visa brands.

One of the more valuable enhancements has been ScoreCard, a bonus-point and cash-back enhancement that Equifax Card Services has marketed since 1992. Like similar programs from Discover, American Express, Citibank, and other big players, ScoreCard enables cardholders to accrue points toward airline tickets and other merchandise or cash.

Beginning on a test basis, independent banks will have the option of adding a car rebate feature to their ScoreCard program next year. Cardholders can earn a 5% rebate on purchases, to be redeemed for an automobile from any car dealer -- which differentiates it from the Ford/Citibank and GM MasterCard programs.

As an added incentive for IBAA Bancard members, participaring banks can capitalize on an opportunity to offer those cardholders an automobile loan when they redeem the points.

On the merchant side, Equifax converted to a new processing system in February, and as a result, it nearly doubled the proportion of IBAA banks on-line, from 42% to 70%.

In 1995, Equifax will move into the second phase of a four-year, $18 million processing system conversion. For a year, the card services unit has been using FBS Software's Merchant System for managing retailer accounts.

The system has been modified to handle the needs of smaller banks. To keep it proprietary, Equifax Inc. acquired FBS Software this year.

The upshot is that IBAA banks can structure pricing to the cardholder level, said Finda F. Echard, president and chief executive officer of IBAA Bancard. "This will provide the smaller institutions a lot more flexibility with interest rate calculations."

IBAA Bancard will launch a card activation service in January and will enhance its fraud protection plan to add counterfeit coverage.

In addition, Equifax will employ its check-guarantee service -- the data base of bad checks dating from Telecredit's origins in the 1960s -- to help issuers screen demand deposit account customers for Visa Check and MasterCard MasterMoney debit cards.

Through IBAA, Equifax has broadened its product offering to include a checking account marketing service, a Community Reinvestment Act compliance package, and scoring products.

It is reviewing telemarketing and collection packages, and next month, it will launch a portfolio review product to analyze the performance or determine the creditworthiness of a cardholder.

"It's an approach that we believe we can provide, or help IBAA provide, more of a total solution to their customer base," Mr. Kennedy said. "We provide one-stop shopping and the ease of access to financial services that were previously not available to the community bank. That's where we want to play in this business, and we believe we can add value."

Since the first agreement with Equifax, pricing for the banks has not increased, but with the latest contract, the credit card processing fee will go up 6%. Merchant processing fees for banks will be unbundled and will not change.

Ms. Echard called the relationship with Equifax "outstanding" and a "good fit."

Mr. Ballweg said Equifax "brought economies of scale and price efficiency to the process. They also brought tremendous individual flexibility and options to the banks that allowed them to take the program to their local markets and customer base."

Despite all the new products and projects under way, the partners stay focused on what they view as plenty of opportunity for growth.

Equifax has studied consolidation in the banking industry, focusing on the smaller financial institutions that have the capability and financial standing to issue credit cards.

"We believe the potential market penetration of those institutions is huge," Mr. Kennedy said. "In the next four years, there are in excess of 4,000 additional banks we should be able to penetrate with this program. We're not even 25% penetrated."

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