Part of the fallout from Fifth Third Bancorp’s acquisition of Old Kent Financial Corp. may be the termination of Old Kent’s merchant marketing agreement with First Data Merchant Services, a subsidiary of First Data Corp. of Atlanta.

Neither banking company said this option was being considered, but industry observers speculated that folding Old Kent’s merchant activities into Fifth Third’s processing subsidiary, Midwest Payment Systems Inc., would probably make the most sense, given Fifth Third’s persistent interest in expanding that part of its business.

It is unusual that both companies involved in a merger are active in merchant acquiring and merchant processing, though Old Kent has certainly reduced its role.

In this deal, Fifth Third owns Midwest Payment Systems, which is listed in the Faulkner & Gray 2001 Card Industry Directory as the ninth-largest card processor in the country. (It also lists Fifth Third Bank as the sixth-largest merchant acquirer.) Old Kent, which used to have a merchant bank alliance with First Data, has sold its merchant services business to First Data but maintains a continuing joint marketing agreement under which it refers clients to First Data.

Apparently, the banking companies have not decided what to do about the overlap. “It’s still too early to address all that,” said Larry Magnuson, a spokesman for Old Kent. One problem, he said, is that the contract between Old Kent and First Data is about 300 pages long, but perhaps the more significant issue is that Fifth Third must decide how it wants to use Old Kent’s operations to bolster Midwest Payment Systems.

At a press conference announcing the deal, Fifth Third emphasized its intention to sell Midwest Payment Systems’ e-commerce products in Old Kent’s midwestern market. A spokeswoman for Fifth Third said the company needs more time to address such issues as how Old Kent’s marketing agreement with First Data would factor in to Fifth Third’s plans.

Barry Boertsler, chief executive officer of Midwest Payment Systems, said through a spokeswoman that it is “too early to tell structural organization in terms of merchant processing units.”

Analysts said that Fifth Third will not want to use Old Kent’s name for merchant acquisition in these new markets. “It is Fifth Third’s m.o. to unify brand names,” said Bradley S. Vander Ploeg, an analyst at First Union Securities.

No matter how Fifth Third uses Old Kent’s market presence to promote its merchant processing services, the result is likely to be a blow to First Data, analysts said.

“The pace of mergers and acquisitions in the financial services market and bank market is a negative for First Data,” said Andrew Jeffrey, an analyst at Robertson Stephens. “It leaves potentially fewer customers that can put more pressure on First Data’s pricing.”

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