Cardservice International, an independent processor that specializes in new merchants or those banks consider too risky to handle, has established a referral program with First Data Corp.

Under the agreement, banks that farm out processing to First Data would hand along to Cardservice applications from merchants that would not meet First Data's requirements. Cardservice would take on such merchants, charge higher fees, and enforce strict standards.

"Banks, just like they have lending criteria for people, have standards on the merchant side," said Paul Martaus, president of Martaus & Associates in Clearwater, Fla. "If a merchant falls on the wrong side, it gets rejected for credit card access."

He described Cardservice as "aggressive and smart" and one of the top 10 so-called independent service organizations because of its merchant underwriting program.

Cardservice, based in Agora Hills, Calif., said it plans to establish direct agreements banks in First Data's merchant alliance program. To date, nine banks have signed on with First Data.

First Data does not receive a commission for the referred merchants or any benefits other than allowing banks to hold on to merchants, Cardservice said.

"We approached them and laid out the parameters," said Chuck Burtzloff, Cardservice's president and chief executive officer, in explaining how the deal with First Data originated.

Cardservice said it has established formal merchant referral alliances with about 50 banks. The list includes First Union National Bank, Unified Merchant Services - a Nabanco/NationsBank venture - U.S. Bank, Fleet Bank, United Jersey Bank, and Compass Bank.

First Data alliance bank partners and clients can refer prospective merchants to Cardservice while maintaining their banking relationship with them.

Cardservice will offer the merchants comprehensive transaction processing services, including credit card, automated teller machine/debit cards, check guarantee, travel and entertainment, and Internet marketing capabilities.

Cardservice serves more than 80,000 merchants and processes about 48 million credit and debit transactions annually. It boast over 130 agent offices throughout the United States, with total processing volume of over $3 billion annually.

In August, Cardservice became a value-added reseller for Netscape Communications Corp.'s IStore programs for setting up shop on the Internet. Cardservice had marketed its Internet capabilities since March, also adding Sportsline USA.

In a statement, Roger Peirce, president of the First Data Electronic Funds Services unit, which manages the alliance, said that First Data was "aggressively seeking" all-inclusive merchant service opportunities.

First Data launched its merchant alliance in November 1994 to offer its bank clients the opportunity to participate in the existing merchant businesses of Card Establishment Services. First Data acquired CES, one of the top three providers of transaction services to retail merchants.

This month Huntington Bancshares became the newest addition to the First Data alliance program, bringing 7,000 merchants to the venture.

The First Data/Huntington joint venture will be co-owned and managed by a committee appointed by the two companies. Both will contribute merchant contracts, and both will be responsible for growing the merchant base.

First Data Corp.'s card services group in Omaha will provide banks merchant processing, sales support, and back-office services. It currently services more than 1.7 million merchant outlets and 1,400 financial institutions.

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