In Wells Fargo, Wachovia, JPMorgan Chase and Washington Mutual, the financial tech industry had four of its biggest customers, adding up to about 20 percent of North American retail bank IT spending a year, according to TowerGroup.

You can guess what has the industry's vendors worried now. Across the landscape of payments, data systems, processing, cards, networks - you name it - the absorption of two national retail institutions is an unsettling development for third-party partners.

"We're going to see systems consolidation," says Jim Eckenrode, banking and payments research executive at TowerGroup. "And as a result, there will certainly be winners and losers."

Exactly who wins and loses may take several years to play out; the integration effort behind Wells Fargo's takeover of Wachovia and JPMorgan Chase's absorption of WaMu promise to be slow and deliberate. But that doesn't always quell the pain, or the panic.

Last month, TSYS came out with third-quarter earnings three weeks early to address how the mergers would impact the payments processing business it has with all four institutions. TSYS has long-term contracts in place for both WaMu and Wells, although the consumer portion of Wells' portfolio is handled by First Data. JPMorgan Chase last year gave notice it planned to move its business in-house, and "chances are at some point in the future JPMorgan Chase will consider consolidating the WaMu portfolio into its own in-house portfolio," said chairman and CEO Philip Tomlinson, in a conference call with analysts.

The two bank mergers also present a ground-shifting change in cards and ACH processing. MasterCard, already smarting from losing a debit issuance relationship with Royal Bank of Scotland, may now have to wonder what the future holds with a consolidated JPMorgan Chase-WaMu group: Washington Mutual issued MasterCard debit cards, while JPMorgan Chase's preference is Visa.

Just to make it sting a little more, MasterCard thought it was close to a major win when its prime issuer, Citigroup, appeared to be the front-runner for Wachovia. With Wachovia's 12 million debit cards in circulation going to Wells Fargo instead, Wells will now handle about $90 billion in debit transactions on 29 million cards, consolidating its No.2 standing in retail banking, says Aite Group payments analyst Adil Moussa. That portends turbulence for many third-party card providers, loyalty program firms, card-stock companies and dozens of other vendors, he says. "It will give [Wells] more clout to negotiate better pricing with vendors, including the First Datas of the world. You can regain your volume, but Wells Fargo is sure going to ask for re-pricing and concessions."

If and when JPMorgan Chase and Wells move forward with plans to integrate and consolidate operations, Eckenrode expects the home-court advantage to prevail in most instances. "It's too early to tell who'll be the winners and losers at the individual application level," he says, "but you can safely assume that, more or less, the acquiring institutions' platforms will be the ones that survive."

He says there's a potential silver lining for certain niches, such as firms involved in systems integration and professional services to assist in the redundancy exercises. But overall there will likely be diminished funds for investing in new technology and upgrades, Eckenrode says, particularly as banks continue to struggle through the economic morass.

And vendors will remain on the sideline, hoping to stay in the game.

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